How Much Business Does It Take for an Out-of-State Company to Be Sued in Your State?

One of the longstanding questions in the law is when someone from one state can be sued in another. One variation of this question involves an out-of-state company selling products that find their way into the state in question. The general rule has been that if the company had sufficient contacts with the state in question, the company can be sued. A few recent cases from the Supreme Court and the Oregon and Washington courts help explain how many sales might be enough of a contact.

In 2011, the Supreme Court was faced with a case of a man injured by a metal shearing machine. The machine was made by a British company that hired an American distributor. They managed to sell one machine in New Jersey, and an employee of the buyer was injured. The Supreme Court ruled for the manufacturer, holding that it couldn’t be sued in New Jersey, but there was no majority opinion. Four justices voted for the manufacturer on one argument; two voted for the manufacturer based on narrower reasoning, and three voted for the buyer.

The four justices who favored broad reasoning focused on where the manufacturer directed its marketing efforts: at the United States in general, and not necessarily to any particular state. Probably the only states they would have accepted were three states in which the manufacturer attended trade shows, the states of identified potential customers, and the home state of the distributor.

The two justices who favored narrower reasoning wanted to stick to the reasoning of an earlier case and focus on whether, on a regular basis, the manufacturer had sufficient sales in New Jersey that it could be seen to have targeted the state, or whether it did in fact target New Jersey. One sale, they concluded, was not enough. Both the Oregon and Washington courts have followed this line of reasoning in their recent cases, based on a general understanding of how to read Supreme Court rulings with no clear majority.

The Oregon Supreme Court faced a similar question in 2012. A Taiwanese company made battery chargers, which it sold to an Ohio manufacturer of motorized wheelchairs, who then sold the wheelchairs nationally. In a two year period, about 1,100 wheelchairs incorporating the Taiwanese chargers were sold in Oregon. In 2008, the user of one of those wheelchairs died in a home fire that her family alleged was started by a defective charger. They sued the Taiwanese company. After reviewing the Supreme Court’s 2011 ruling and an earlier case in which it was uncertain how many products were sold in a particular state, the Oregon court decided that 1,100 sales were enough to be seen as a regular flow of business into Oregon that the Taiwanese manufacturer might be seen as going after the Oregon market. As a result, it allowed the suit to proceed in Oregon; that’s as far as the case had progressed to that point.

The Washington cases, which were decided by the Court of Appeals, one in January 2015 and one in 2014, are somewhat different. In one case, the Attorney General sued 20 manufacturers of cathode ray tubes for price fixing. None of the defendants were based in Washington, but at the time of the alleged fixing, CRTs were used in 90 percent of monitors and 73 percent of TVs sold in the United States. In the other case, the Attorney General filed a similar suit against 20 manufacturers of LCD displays, which essentially cover the rest of the market. In those cases, the court ruled that the manufacturers’ sale of products that were expected to be sold in large numbers in Washington, and which in fact were sold in large numbers in Washington, showed a systematic contact with Washington and therefore more than enough to allow them to be sued in Washington.

There are many situations where the question of where someone can be sued may come up. It may arise in product liability claims, contract disputes, intellectual property claims, or other issues. For example, if a local writer, artist, or musician self-publishes their work and makes it available online or through an online store such as CafePress or CDBaby, the question may come up whether there was an attempt to sell into, for example, California. It may be advisable to talk to a lawyer regarding the risks that may arise and how to restrict exposure to suits in as few states as possible.

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One Response to How Much Business Does It Take for an Out-of-State Company to Be Sued in Your State?

  1. This week, Washington settled its case with the LCD manufacturers. If you bought an LCD in Washington, you may want to check with the Washington Attorney General if you belong to the class and might be eligible for a rebate.

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