By Thomas M. Kester
Every law student's favorite course (and I mean this sarcastically) is civil procedure. If you can imagine that a lawsuit is like a board game, then civil procedure is the rule book that nobody (save that one guy) likes to read. Reading the Rules of Civil Procedure is a bit like reading the dictionary—hardly anyone does it for fun.
For a player to be a part of the game initially, the court must have personal jurisdiction and subject matter jurisdiction over that player (along with some other stuff ). If not, then they cannot play, cannot pass “GO,” and cannot collect $200.00. A lot of personal-jurisdiction questions come down to corporations arguing that they didn’t know (or couldn’t reasonably expect) that Product X it makes in State X would end up in State Y or that the connection between Product X and State Y is too tenuous to make a legitimate argument that it should be on notice of potential lawsuits.
First, I gotta drop some organic-chemistry knowledge on y’all: Methyl tert-butyl ether (“MTBE”) (and for you IUPAC nerds: 2-Methoxy-2-methylpropane) is a gasoline additive that raises the octane number. MTBE replaced tetraethyl lead in gas back in the late 70s (once someone realized that lead is a neurotoxin for humans) to reduce “knocking” in internal-combustion engines. What can happen is underground storage tanks begin to leak gasoline (with MTBE) into the soil. The problem with MTBE is that it likes to hang around as a ground pollutant, especially seeping into bodies of water and making drinking water taste funny.
First, I gotta drop some organic-chemistry knowledge on y’all: Methyl tert-butyl ether (“MTBE”) (and for you IUPAC nerds: 2-Methoxy-2-methylpropane) is a gasoline additive that raises the octane number. MTBE replaced tetraethyl lead in gas back in the late 70s (once someone realized that lead is a neurotoxin for humans) to reduce “knocking” in internal-combustion engines. What can happen is underground storage tanks begin to leak gasoline (with MTBE) into the soil. The problem with MTBE is that it likes to hang around as a ground pollutant, especially seeping into bodies of water and making drinking water taste funny.
Back in June 2014, the State of Vermont filed a complaint against twenty-nine defendants (oil and chemical companies) that “manufacture MTBE or . . . refine, blend, or supply gasoline containing MTBE, and/or . . . promote, market, or distribute the sale of such gasoline.” The State asserted that the defendants knew “that it [MTBE] would reach and contaminate the waters of the State of Vermont, cause[] widespread degradation—as well as a threat of future harm—to both surface water and groundwater within the state.” The State sued these defendants on numerous grounds and wanted “compensation for damages to natural resources and for the costs of investigating, monitoring, and remediating those damages, as well as injunctive and equitable relief and punitive damages”
One of the defendants, Total Petrochemicals & Refining USA, Inc. (“TPRI”), moved to dismiss the complaint for lack of personal jurisdiction because to allow the suit “would violate traditional notions of fair play and substantial justice” (that sentence, as a lawyer, has been drilled into my psyche from Civil Procedure class). TPRI asserted that they have no business located in Vermont, never sought to do business in Vermont, never entered into a contract to do business in Vermont, never made or refined MTBE in Vermont, and “from 2006 to the present, only 0.0013% of TPRI’s total revenue came from Vermont sales.” The State countered by stating that TPRI “knowingly placed its fungible commercial products in a national distribution system that included Vermont,” and used the testimony of a gas expert to explain how “it was ‘reasonable to conclude’ that refiners supplying MBTE-gasoline to the East Coast distribution system understood . . . the likelihood that, over time, they were supplying MTBE-gasoline to . . . Vermont.” Alternatively, the State also asked that it be allowed to do some discovery as to find more evidence about TPRI and personal jurisdiction.
The superior court denied TPRI’s motion to dismiss, stating that TRPI had “sufficient contacts” with Vermont for the court to assert personal jurisdiction. The superior court (in its order denying TPRI’s motion to reconsideration) stated that “TRPI took active steps in sending its products through the Colonial Pipeline from Texas to New Jersey and conducted activities . . . that actively directed its products for distribution and use throughout the entire northeastern United States gasoline market, including Vermont, such that it could have been foreseen being haled into court in Vermont as a destination state.” TPRI appeals the denial of its motion to dismiss, arguing that “neither Vermont’s long-arm statute nor established principles of federal due process . . . permit the exercise of personal jurisdiction over a nonresident defendant based solely on either mere participation in an alleged national market or the unilateral conduct of third parties.”
Vermont, like many states, has a “long-arm statute” that provides personal jurisdiction over non-resident defendants “to the full extent permitted by the [federal] Due Process Clause.” What is “permitted” is based on Supreme Court of the United States’ (“SCOTUS”) case law. TPRI wants the SCOV to look at two recent SCOTUS cases, and TPRI argues that these cases hold that “a defendant cannot be subjected to personal jurisdiction based on either the mere foreseeability that its product will end up in the subject forum or the unilateral conduct of third parties.”
One of the defendants, Total Petrochemicals & Refining USA, Inc. (“TPRI”), moved to dismiss the complaint for lack of personal jurisdiction because to allow the suit “would violate traditional notions of fair play and substantial justice” (that sentence, as a lawyer, has been drilled into my psyche from Civil Procedure class). TPRI asserted that they have no business located in Vermont, never sought to do business in Vermont, never entered into a contract to do business in Vermont, never made or refined MTBE in Vermont, and “from 2006 to the present, only 0.0013% of TPRI’s total revenue came from Vermont sales.” The State countered by stating that TPRI “knowingly placed its fungible commercial products in a national distribution system that included Vermont,” and used the testimony of a gas expert to explain how “it was ‘reasonable to conclude’ that refiners supplying MBTE-gasoline to the East Coast distribution system understood . . . the likelihood that, over time, they were supplying MTBE-gasoline to . . . Vermont.” Alternatively, the State also asked that it be allowed to do some discovery as to find more evidence about TPRI and personal jurisdiction.
The superior court denied TPRI’s motion to dismiss, stating that TRPI had “sufficient contacts” with Vermont for the court to assert personal jurisdiction. The superior court (in its order denying TPRI’s motion to reconsideration) stated that “TRPI took active steps in sending its products through the Colonial Pipeline from Texas to New Jersey and conducted activities . . . that actively directed its products for distribution and use throughout the entire northeastern United States gasoline market, including Vermont, such that it could have been foreseen being haled into court in Vermont as a destination state.” TPRI appeals the denial of its motion to dismiss, arguing that “neither Vermont’s long-arm statute nor established principles of federal due process . . . permit the exercise of personal jurisdiction over a nonresident defendant based solely on either mere participation in an alleged national market or the unilateral conduct of third parties.”
Vermont, like many states, has a “long-arm statute” that provides personal jurisdiction over non-resident defendants “to the full extent permitted by the [federal] Due Process Clause.” What is “permitted” is based on Supreme Court of the United States’ (“SCOTUS”) case law. TPRI wants the SCOV to look at two recent SCOTUS cases, and TPRI argues that these cases hold that “a defendant cannot be subjected to personal jurisdiction based on either the mere foreseeability that its product will end up in the subject forum or the unilateral conduct of third parties.”
If you ask a lawyer what the first thing that comes to their legal mind when you say “International Shoe,” “Burger King,” “World-Wide Volkswagen,” “Goodyear Dunlop Tires,” or “Asahi Metal Industry,” I bet dollars to donuts their eyes will roll back into their head and they will start foaming at the mouth while ritualistically chanting “minimum contacts,” “stream of commerce,” and “fair play and substantial justice” in a nonsensical, incoherent manner.
The SCOV, for almost five pages, reviews the controlling SCOTUS’ personal-jurisdiction case law that illustrates the quintessential takeaway of personal jurisdiction: informative but very fact dependent and subjectively vague. I am always cognizant of the balance between legal education and keeping our audience’s attention that SCOV Blog strikes when discussing areas of law like this, and so I will no bore the reader with an intensive mini-personal jurisdiction lesson. Suffice it to say, whether or not personal jurisdiction exists (especially where products from a company enter into interstate commerce) can best be illustrated as a gradient between “regular and anticipated flow of products from manufacture to distribution to retail sale” on one end and “random, fortuitous, or attenuated contacts” on the other. The more towards the former the court finds, the better the chances that personal jurisdiction will be found.
The SCOV next looks to two federal district court cases in New York that also deal with MTBE and personal jurisdiction. In both cases, the New York district court found personal jurisdiction, reasoning that the “manufacturer of MTBE had created a national market for its product and had sold it to refiners, traders, and blenders who incorporated it into their gasoline.” Because great minds think alike, the SCOV also finds personal jurisdiction based upon the instructive nature of the case law from SCOTUS and New York district court.
Reviewing the facts, the SCOV sees that the State oil expert’s opinion that “companies such as TPRI that supply MBTE-gasoline to the East Coast distribution system do so with the understanding that the fungible gasoline they supplied through this system was likely to eventually end up in the Northeast, including Vermont” is sufficient (along with the complaint and the rest of the expert’s affidavit) to find personal jurisdiction.
The SCOV next looks to two federal district court cases in New York that also deal with MTBE and personal jurisdiction. In both cases, the New York district court found personal jurisdiction, reasoning that the “manufacturer of MTBE had created a national market for its product and had sold it to refiners, traders, and blenders who incorporated it into their gasoline.” Because great minds think alike, the SCOV also finds personal jurisdiction based upon the instructive nature of the case law from SCOTUS and New York district court.
Reviewing the facts, the SCOV sees that the State oil expert’s opinion that “companies such as TPRI that supply MBTE-gasoline to the East Coast distribution system do so with the understanding that the fungible gasoline they supplied through this system was likely to eventually end up in the Northeast, including Vermont” is sufficient (along with the complaint and the rest of the expert’s affidavit) to find personal jurisdiction.
The SCOV also declines to follow other case law that TPRI highlights because “stream of commerce” case law is more in line with the facts of the instant case. Finally, the SCOV states that “traditional fair notion of fair play and substannnnnnnnnnnn”—sorry, I just blacked out at my keyboard for a second—what I mean to say is that the SCOV finds that minimum contracts are sufficient to uphold Due Process guarantees.
As the world becomes a smaller place and trade becomes easier, more efficient, and a foreign producer’s ever-increasing interstate market penetration becomes the norm, the reality of business arguing “we didn’t know,” while clamping their hands over their eyes, seems like an antiquated argument (especially in this digital, interwebs-saturated economy). Who knows if an American court will find personal jurisdiction over a Mongolian-based yak jerky manufacturer when a plaintiff’s windpipe becomes lodged by the gamey, lip-smacking goodness of their “Yak Snack” product. In the personal-jurisdiction arena, it all boils down to (and I know it’s terse and not particularly enlightening) the facts and the law.
As the world becomes a smaller place and trade becomes easier, more efficient, and a foreign producer’s ever-increasing interstate market penetration becomes the norm, the reality of business arguing “we didn’t know,” while clamping their hands over their eyes, seems like an antiquated argument (especially in this digital, interwebs-saturated economy). Who knows if an American court will find personal jurisdiction over a Mongolian-based yak jerky manufacturer when a plaintiff’s windpipe becomes lodged by the gamey, lip-smacking goodness of their “Yak Snack” product. In the personal-jurisdiction arena, it all boils down to (and I know it’s terse and not particularly enlightening) the facts and the law.
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