Illinois Supreme Court in Russell v. SNFA, 2013 IL 113909 (April 18, 2013) finds specific jurisdiction over a foreign component part manufacturer, finding that its products were part of the marketing plan of the seller's product. What does this mean for component part manufacturers that have integrated marketing plans with the seller's product?
II. Procedural and Factual History
The plaintiff’s products liability action arising from a fatal helicopter crash occurred in Illinois and sought recovery from a number of entities, including defendant SNFA, a French company that manufactured a custom tail-rotor bearing for the helicopter. The plaintiff’s decedent was the sole occupant and pilot of the helicopter. The helicopter was manufactured by Agusta S.p.A. in Italy in 1989. The seven tail-rotor bearings were custom made by the defendant for the 190C model in France. Over the course of several years, some of the tail-rotor bearings were replaced. The replacement bearings were purchased by a wholly-owned subsidiary of Agusta. As with the original bearings, the replacement bearings were manufactured by the defendant SNFA in France. Eventually, the helicopter was sold to the plaintiff’s employer. It was uncontested that the plaintiff’s helicopter contained tail-rotor bearings manufactured by the defendant when it crashed in Illinois.
The defendant SNFA moved to dismiss the action arguing that Illinois lacked personal jurisdiction over it, and the plaintiff sought jurisdictional discovery to respond to the motion. The plaintiff also obtained information regarding defendant’s sales, marketing, and distribution activities along with similar information from Agusta and the wholly-owned subsidiary. During discovery, it was established that the defendant did not have any offices, assets, property or employees in Illinois, but did do business internationally in Europe and the United States. It was also discovered that five Agusta helicopters were sold to customers located in Illinois in the past ten years. The defendant admitted that it provided custom-made and unique bearings for Agusta helicopters. However, the defendant did not have any direct United States customers for its custom-made helicopter bearings. Further, SNFA had attempted to engage in a business relationship with a company having an office in Rockford, Ill., but not for the purpose of selling helicopter equipment. SNFA understood that Agusta helicopters were marketed and sold in the United States.
The trial court granted the defendant’s jurisdictional challenge, but the Appellate Court reversed, finding that SNFA was subject to specific jurisdiction in Illinois. The Illinois Supreme Court affirmed the judgment of the Appellate Court.
III. Illinois Supreme Court’s Analysis
The sole issue before the court was whether the nonresident defendant’s connection or contact with Illinois was sufficient to satisfy federal and Illinois due process when subsection (c) of the long-arm statute was invoked. Subsection (c) states that a court “may also exercise jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States.” 735 ILCS 5/2-209(c). The court had to consider whether the defendant had minimum contacts with Illinois and whether subjecting it to litigation in Illinois was reasonable under traditional notions of fair play and substantial justice. Since the court did not find general jurisdiction to apply here, it had to look at the threshold issue as to whether specific jurisdiction applied by using the “minimum contacts” test. Specific jurisdiction requires a showing that the defendant purposefully directed its activities at the forum state and the cause of action arose out of or relates to the defendant’s contacts with the forum state. One way to satisfy the requirements for specific jurisdiction is under the “stream of commerce” theory, which was first recognized in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). Under this theory, the forum state is allowed to exercise personal jurisdiction over a nonresident defendant “that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.” Id. at 297-98. However, over the years, the United States Supreme Court has elaborated on this theory by requiring some type of additional conduct other than general awareness that the stream of commerce would bring its product into the forum state. While the United States Supreme Court has been split as to what type of additional conduct would be needed, some examples outlined in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987) include marketing the product in the forum, advertising in the forum, and establishing channels for advice or support to consumers in the forum.
Applying this overview of specific jurisdiction to the case at hand, the Illinois Supreme Court found that Agusta and its wholly-owned subsidiary effectively operated as an American distributor for the defendant’s tail-rotor bearings in the U.S. market. The court reasoned that the defendant custom-made these unique bearings for Agusta helicopters, which was the sole market for this type of bearing. Since the bearings were custom-made, the defendant intended its products to be an inseparable part of the marketing plan of Agusta. The court further reasoned that the defendant’s business relationship with a company having a Rockford, Ill. office constituted the “something more” requirement under the narrow “stream of commerce” theory. Therefore, specific jurisdiction was found due to the defendant delivering its product into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.
IV. Effect of Decision
The Illinois Supreme Court seems to broaden the long-arm statute by allowing the marketing and distribution chains utilized by the defendant manufacturer to serve as evidence under the “stream of commerce” theory. The Illinois Supreme Court’s decision is of great importance to component part manufacturers with knowledge that its products are part of a seller’s marketing plan. While it may benefit the component part supplier to have its products “highlighted” by the seller, it is the first step toward subjecting the supplier to specific jurisdiction in Illinois. While the case discussed “specially designed” component parts, it left unanswered the question of whether a mass produced component part supplier would be subject to the same analysis. Additionally, the court’s analysis of the defendant’s additional contacts with the state, including a minimal relationship with an Illinois company and three trips to the state to solicit additional business not related to the products in this case, suggests that any contact with Illinois will satisfy the minimum contacts requirement of specific personal jurisdiction.