Virginia Court Rejects “Stream of Commerce” Theory of Jurisdiction

The United States Supreme Court recently held that a foreign manufacturer that places a product into the stream of commerce in the United States does not automatically subject itself to jurisdiction in each of the states where the product might foreseeably end up. Relying on this decision, a Roanoke Circuit Court judge has dismissed a Japanese manufacturing company from a product-liability case brought against it in Virginia.

Janet May was employed by Progress Press in 2006 and was operating a stitching machine made by Osako & Co., a Japanese company. She alleged that she was injured because the machine had an improper conveyor belt. She sued Osako and others for negligence and breach of warranty.

Osako sold its products in the United States through Consolidated International Corp., its exclusive distributor, which was a company independent of Osako. Osako knew that its products would be sold in the United States generally and made some product changes for the U.S. market but did not take any actions to specifically target Virginia. Osako has no physical locations in the United States. On these facts, Osako moved to dismiss May’s suit for lack of jurisdiction.

Judge Charles N. Dorsey of the Circuit Court granted the motion. He relied heavily on J. McIntyre Machinery v. Nicastro, a U.S. Supreme Court ruling that was decided June 27, 2011. In the Nicastro case, which was a product-liability case with very similar Money Stream.jpgfacts to this one, the Supreme Court reversed the New Jersey Supreme Court and found that New Jersey lacked jurisdiction over a British company that sold a piece of machinery in that state. The high court rejected the New Jersey court’s theory that placing the product into the “stream of commerce” conferred jurisdiction on that state’s courts.

May had relied heavily on the Nicastro case – before it was reversed. Indeed, she had contended that her case and that case were “so similar that this Court has no way to find differently than the New Jersey court,” Judge Dorsey wrote. In view of the reversal in Nicastro, the judge concluded, he had no choice but to apply the U.S. Supreme Court’s ruling and to find that Virginia courts lack jurisdiction over Osako.

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