Foreign Manufacturers Legal Accountability Act - Opening the Floodgates Against Overseas Defendants

Have you ever experienced this scenario: Your expert has identified the cause of a loss in the United States, but the manufacturer of the failed product is overseas? If so, then you have to start thinking about issues such as how you will serve process on the overseas defendant and will the foreign defendant be subject to personal jurisdiction in the United States? Congress is currently reviewing a bill designed to circumvent much of the frustration with serving process and obtaining jurisdiction over foreign manufacturers. Currently, in order to obtain jurisdiction in the United States over an overseas product manufacturer, you have to prove that the overseas defendant has sufficient contacts with the state in which you are filing suit. To prove sufficient contacts exist you have to gather as much information as you can on the defendant's contacts with your forum state, including:

•           Does the defendant have office/property/bank accounts in your forum state?
•           Does the defendant regularly ship products to the forum state?
•           Does the defendant advertise to ship products to the forum state?  

Often the foreign defendant may have little or no contacts with the forum state, preventing you from filing suit in the U.S. However, Congress is looking to make it easier for plaintiffs to both serve foreign defendants and obtain jurisdiction over them in a U.S. Court. The bill titled "Foreign Manufacturers Legal Accountability Act" is currently under review by Congress and is expected to pass in the near future. It requires foreign manufacturers of products/goods shipped to the United States to establish an agent in at least one U.S. State to accept service of process on behalf of the manufacturer. In addition, the bill requires that the foreign manufacturer consent to personal jurisdiction in the State or Federal courts of the State in which the registered agent is located. Congress' attempt to create personal jurisdiction over foreign manufacturers by statute is arguably inconsistent with the Due Process Clause of the Constitution from which our current personal jurisdiction standard was born. However, Congress did wisely include a provision that the State in which the registered agent is located be a state "with a substantial connection to the importation, distribution, or sale of the products of such foreign manufacturer or producer." This allows for the argument that the foreign manufacturer is conceding to sufficient minimum contacts with state in which the registered agent is located because the foreign manufacturer is picking the state it has sufficient contacts with to be the location for the agent. It is likely that the Supreme Court will eventually get involved in the issue. But if the current bill is passed and upheld by the Supreme Court we can expect the floodgates to open against foreign manufacturers since personal jurisdiction would be automatically established in the State in which the foreign manufacturer's registered agent for service of process is located. 

Avoiding Service On Foreign Manufacturers

Subrogation cases often involve the pursuit of manufacturers in foreign countries.  Generally, service of process on those foreign manufacturers must be made pursuant to the requirements of the Hague Convention.  These requirements are time-consuming and costly, however, according to a recent California Appellate Court decision they may not always be necessary.

In Yamaha Motor Co., Ltd. v. Sup. Ct., the California Court of Appeal recently held that under certain circumstances a party may serve a foreign corporation by serving the corporation's American subsidiary.  The court considered factors including whether (1) there is ample regular contact between the local representative and the foreign defendant, (2) the likelihood that the local representative will notify the foreign defendant of the service, and (3) the overall relationship between the two companies.

The court concluded service on Yamaha-Japan was effectuated via service on Yamaha-American as this domestic entity was the “general manager in this state” and was the American face of the Japanese company.  Yamaha-America had (1) an exclusive arrangement to sell the foreign manufacturer's products, (2) provided warranty service and English owner manuals, (3) performed testing and marketing, and (4) received complaints about the manufacturer's products.  As a result, the court concluded that service of Yamaha-American was effective service for Yamaha-Japan under California law.  

Cases involving service of process on foreign manufacturers should be evaluated on a case-by-case basis to determine whether service on its American subsidiary will suffice.  If so, it will save time and money in the pursuit of your subrogation recovery.