Personal Jurisdiction in Oregon--Contacts May Not Be Enough

 A recent Oregon case offers a reminder that subrogating carriers need to carefully examine personal jurisdiction before pursuing an out-of-state defendant. In Robinson v. Harley Davidson Motor Company (Oregon Ct. App. 2012), Oregon resident Robinson was riding her Harley Davidson motorcycle in Idaho when she noticed a problem with the front wheel. Although she had purchased the motorcycle in Oregon, she took it to an Idaho dealer for warranty work. The next day, the wheel malfunctioned and Robinson was thrown from the motorcycle and injured.

Robinson sued the Idaho Harley dealer, among others, in Oregon state court. Although the Idaho dealer did not have a business located in Oregon, it maintained contacts there, including advertising in Oregon and selling parts, accessories and apparel to Oregon residents. Nevertheless, the Idaho dealer brought a motion to dismiss Robinson’s case, arguing that Oregon courts did not have personal jurisdiction over it.

The trial court agreed, and dismissed the Idaho dealer from Robinson’s case. In an opinion affirming the dismissal, the Oregon Court of Appeals held that “plaintiff’s claims do not arise out of or relate to defendant’s Oregon activities.” Since the Idaho dealer’s work on Robinson’s motorcycle did not take place in Oregon, the court found it was irrelevant that the dealer advertised or sold parts there.

In light of recent U.S. Supreme Court cases (such as J. McIntyre Machinery, Ltd. v. Nicastro) holding foreign manufacturers are not subject to personal jurisdiction simply by placing products in the stream of commerce, Robinson v. Harley offers another example where “contacts” with a state may not be enough to create personal jurisdiction there.

Ninth Circuit Holds Loss of Use Damages and Surveyor's Fees Recoverable in Maritime Subrogation Case

A recent 9th Circuit Court of Appeals case included favorable holdings for subrogating carriers on the types of damages recoverable in maritime cases. The case, Oswalt v. Resolute Industries, Inc., 2:08-cv-01600-MJP (June 16, 2011), stemmed from a fire on a vessel that originated at a heater that was being repaired by Resolute Industries. The vessel owner and its subrogating carrier sued Resolute, who in turn filed a third party complaint against the heater manufacturer, Webasto Products. On appeal, the 9th Circuit upheld a jury verdict against Resolute for breach of the implied warranty of workmanlike performance, and likewise reversed summary judgment dismissal of Resolute’s product liability claim against Webasto.

Perhaps the most notable aspect of the Oswalt decision, however, was the Court’s treatment of the plaintiffs’ damages claims. First, the owner claimed that since he could not continue to use his vessel as a second home when he traveled to Oakland while working as a flight attendant, that he was entitled to loss of use damages (i.e. hotel costs). Although Resolute cited longstanding case law holding that loss of use damages were not recoverable for “pleasure crafts,” the Court rejected this argument, stating that the owner was not claiming lost “recreational” use, and that subject hotel costs were “both business-related and entirely nonspeculative.” Secondly, the subrogating carrier claimed that it was entitled to reimbursement of the cost of the marine surveyor it hired following the fire. The Court held that even though the insured did not participate in hiring the surveyor, and even though this cost was not on the subrogation receipt, that the subrogating carrier was still entitled to recover this aspect of its damages.

In summary, the 9th Circuit allowed the plaintiffs to recover their claims for loss of use and the surveyor’s fees stemming from the vessel fire. The damages holdings of the Oswalt case offer a reminder that subrogating carriers may be able to successfully recover diverse types of damages in the maritime context.

Washington Court Rules Branding Seller May be Sole Party Liable for Manufacturing Defect

The Washington Court of Appeals recently ruled that a seller may be the sole party held strictly liable for a manufacturing defect if the product is sold under the seller’s brand or trade name. In 2007, Monika Johnson was riding in downtown Seattle when the carbon fiber fork of her bicycle (which attaches the frame to the wheel) sheared, causing the fork and wheel to become disconnected from the bicycle (and an accident that seriously injured Ms. Johnson). The bicycle was purchased at REI and sold under REI’s brand name, Novara. However, the actual carbon fiber fork that failed was manufactured by another entity, Aprebic Industry Company (the fork did have the Novara brand name on it as well). Ms. Johnson filed a lawsuit that named only REI as a defendant.

REI attempted to shift blame to Aprebic by arguing in a summary judgment motion that jurors should be able to apportion fault between the two companies. The trial court disagreed, and ruled that while REI could still pursue Aprebic (through a third-party complaint) in a severed trial, the jury would not be allowed to attribute fault to anyone other than REI. In Johnson v. Recreational Equipment, Inc. (REI), the Washington Court of Appeals upheld the trial court’s ruling. If jurors were allowed to allocate fault, the Court reasoned, the manufacturer would “necessarily be 100 percent responsible for the defectively manufactured product” and “the product seller would avoid all such liability.” Since Washington’s Product Liability Act (WPLA) explicitly allows for a product seller to be held liable as a manufacturer for defects in the seller’s branded products, the Court concluded it would undermine the WPLA to allow apportionment of fault.

The Johnson case reaffirms that subrogating carriers may have multiple options when pursuing a product defect claim in Washington. In the case of a defect involving a seller’s branded product, the carrier may consider pursuing the manufacturer, the seller, or both.


Inverse Condemnation Alive and Well in Oregon

In February 2011, the Oregon Court of Appeals reaffirmed that the doctrine of "inverse condemnation" is alive and well in Oregon. Inverse condemnation claims do not require a showing of negligence, and instead arise by showing that a government actor (e.g. a city) “substantially interfered” with an owner’s right to use his or her property, and that therefore the owner is owed “just compensation” under the Constitution (in this case, Article I, Section 18 of the Oregon Constitution—the “Takings Clause”). The case, Dunn v. City of Milwaukie (CV07040247), stemmed from property damage caused when a municipal sewer system backed-up into a home. The City, at the time, had been “hydrocleaning” a nearby sewer (blasting high-pressure water from a tanker), allegedly causing the backup. While this cleaning was taking place, sewer water shot from bathroom fixtures into the home and caused substantial property damage throughout.

The Court of Appeals affirmed the trial court's $55,000 award based on the homeowner's inverse condemnation claim. In its decision, the Dunn Court rejected arguments from the City that it did not "intend" to harm the plaintiff, and that since the damage was repairable, that there was no "substantial interference" with the homeowner’s property rights. The Dunn case is a recent reminder of the subrogation opportunities that may arise in property damage cases stemming from government work or municipal systems. Even where a case does not involve negligent work performed by a municipality (or other government actor), a subrogating carrier may still pursue a recovery case if it can demonstrate that the government impeded its insured’s property rights.