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C&K Auto Imports, Inc. v. Daimler, AG

Superior Court of New Jersey, Appellate Division

June 21, 2013

C&K AUTO IMPORTS, INC. & C&K AUTO IMPORTS SOUTH, INC., Plaintiffs-Respondents,


Submitted March 4, 2013

On appeal from an interlocutory order of Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4922-12.

Marshall, Dennehey, Warner, Coleman & Goggin, attorneys for appellant (Alicia Calaf and Walter F. Kawalec, III, on the briefs).

Law Offices of Ian J. Hirsch & Associates, LLC, attorneys for respondents C&K Auto Imports, Inc. & C&K Auto Imports South, Inc. (Ian J. Hirsch, on the brief).

Before Judges Ashrafi and Espinosa.


We granted defendant Garff Enterprises, Inc., d/b/a/ Ken Garff Imports (Garff), leave to appeal from an order that denied its motion to dismiss the action against it on jurisdictional grounds. For the reasons that follow, we reverse.

Unless otherwise stated, the following facts are derived from the complaint.

Plaintiff C&K Auto Imports, Inc. (C&K) is licensed to do business by the State of New Jersey and has corporate offices in Hasbrouck Heights, New Jersey. Plaintiff C&K Auto Imports South, Inc. (C&K South), is licensed to do business by the State of Florida and has corporate offices in Lighthouse Point, Florida.

Garff is a franchise dealer of Mercedes Benz automobiles doing business in Salt Lake City, Utah. A certification by Michael D. Creer, Vice President and General Counsel for Garff, states that Garff is incorporated under the laws of the State of Utah, has its principal place of business in Salt Lake City, and is in the business of selling and leasing vehicles in the Salt Lake City vicinity.

This action concerns a 2008 CL 65K AMG Mercedes Benz twelve-cylinder Bi Turbo two-door coupe, Vehicle Identification Number WDDEJ79X58A012250 (the vehicle), which was originally sold to Garff by Mercedes Benz USA, LLC (MBUSA) for $200, 775. The vehicle was shipped into the United States at the port of Los Angeles and shipped to Garff in Salt Lake City. On October 18, 2007, the vehicle was leased to a person or persons identified in the complaint as John Does 1-10. The complaint alleges that Garff leased the vehicle to John Does 1-10, but also that "John Does 1-10 leased the vehicle from Daimler Trust" and that "the vehicle was leased through MB Financial"[1] with title remaining in Daimler Title Company o/b/o Daimler Trust. The complaint does not explain the apparent inconsistency in the allegations that Garff, MB Financial and Daimler Trust leased the vehicle.

Upon expiration of the lease in October 2009, the complaint alleges that Daimler Trust took possession of the vehicle as title holder and sent the vehicle to be auctioned at the Manheim Auction Facility in Las Vegas. The vehicle was purchased online by CrossRoads Mercedes Benz of Lynchburg, Virginia, Inc. (CrossRoads), [2] which in turn sold the vehicle to plaintiffs[3] and was shipped directly to them in Florida. Thereafter, plaintiffs shipped the vehicle to their warehouse in New Jersey.

Tom Sekigami, the president and owner of The Yokohama Trading Co., LLC (Yokohama), contacted plaintiffs through a website and purchased the vehicle for $120, 000. Yokohama directed plaintiffs to ship the vehicle from JFK International Airport to Japan. Prior to shipment, Doron Sauer, CEO and owner of both plaintiffs, detected a noise and had the vehicle inspected by an authorized MBUSA and Daimler dealer in New Jersey. It was determined that the vehicle's engine had been damaged by water.

Plaintiffs repaired the vehicle at a cost of $20, 000. The complaint alleges that the engine should have been replaced by MBUSA under an implied warranty at a total cost of $141, 000 and demands compensatory damages of $206, 000 plus interest, costs of suit and counsel fees. The claims asserted against Daimler and MBUSA are fraud, breach of implied warranty of merchantability, civil conspiracy, misrepresentation, negligence, and unjust enrichment (first through sixth counts). Claims of negligence, breach of contract, and unjust enrichment are asserted against CrossRoads (seventh through ninth counts). The complaint asserts claims of negligence and unjust enrichment against Garff (tenth and eleventh counts). Plaintiffs allege breach of implied contract against Sekigami d/b/a Yokohama (twelfth count). Breach of contract and unjust enrichment claims are asserted against Intrepid Insurance Company (thirteenth and fourteenth counts).

Defendant Garff filed a motion to dismiss the complaint on jurisdictional grounds. In support of that motion, it submitted two certifications from Creer, which asserted the following:

Garff Enterprises has no place of business in New Jersey, is not registered to do business in New Jersey, directs no marketing materials toward New Jersey, does not own any real property in New Jersey, has no salespersons in New Jersey and conducts no business in New Jersey.
Garff Enterprises' only sales of Mercedes-Benz vehicles are from its automobile dealership in Salt Lake City, Utah.
Garff Enterprises sells Mercedes-Benz vehicles as one of many authorized Mercedes-Benz franchise dealerships throughout the country. Garff Enterprises is not a nationwide or even a regional distributor of Mercedes-Benz vehicles. As a franchisee, Garff Enterprises is an independent entity in which neither Mercedes-Benz USA, LLC nor Daimler AG have any ownership interest.
With respect to the vehicle that is the subject of this lawsuit, Garff Enterprises leased this vehicle in Utah. Garff Enterprises did not repurchase the vehicle at the end of the lease.
After leasing the vehicle to its customer in Utah, Garff Enterprises had no control over the subsequent disposition of the vehicle.

Plaintiffs did not dispute any of these factual assertions in opposing the motion. Rather, they contended that personal jurisdiction could properly be exercised over Garff pursuant to a "stream of commerce"[4] theory. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 502 (1980); Charles Gendler & Co., Inc. v. Telecom Equip. Corp., 102 N.J. 460, 468 (1986).

The trial court denied Garff's motion. In this appeal, Garff argues that the trial court erred in doing so because there is no basis for the exercise of personal jurisdiction over Garff in New Jersey. We agree.

The Due Process Clause of the Fourteenth Amendment limits the power of "state courts to enter judgments affecting rights or interests of nonresident defendants." Kulko v. Superior Court of Cal., 436 U.S. 84, 91, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132, 140 (1978). Jurisdiction may be exercised over a defendant only when the defendant has sufficient contacts with the sovereign "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278, 283 (1940)).

In Mische v. Bracey's Supermarket, 420 N.J.Super. 487 (App. Div. 2011), we reviewed the principles applicable to a determination of whether a defendant has sufficient contacts with the state to warrant the exercise of jurisdiction:

In determining whether this test has been satisfied, the Supreme Court distinguishes between specific and general jurisdiction. If a cause of action arises directly out of a defendant's contacts with the forum state, the court's jurisdiction is specific. If a cause of action is unrelated to the defendant's contacts with the forum state, the court's jurisdiction is general and those contacts must be so continuous and substantial as to justify subjecting the defendant to [the forum's] jurisdiction. This standard for establishing general jurisdiction is a difficult one to meet, requiring extensive contacts between a defendant and a forum.
[Id. at 491-92 (internal citations and quotation marks omitted).]

See also Gendler, supra, 102 N.J. at 482.

The extensive contacts required for establishing general jurisdiction are not present here. The allegations against Garff reflect only that it leased the vehicle in Utah more than two years before the vehicle came to New Jersey and had no control over the vehicle thereafter. The assertion of jurisdiction is based on the theory that Garff delivered the vehicle into the "stream of commerce." See World-Wide Volkswagen, supra, 444 U.S. at 297-98, 100 S.Ct. at 567, 62 L.Ed.2d at 502 ("The forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State."); see also Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., Solano Cnty., 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987).

The proper application of the stream of commerce theory of jurisdiction was clarified by the United States Supreme Court in McIntyre, which reviewed and reversed our Supreme Court's decision in Nicastro v. McIntyre Mach. Am., Ltd., 201 N.J. 48 (2010). Our Supreme Court held that jurisdiction could be exercised over a foreign manufacturer of a product, provided the manufacturer "knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states[, ]" even though the manufacturer had never advertised in, sent goods to, or targeted the State in any relevant sense. See id. at 76-77. The United States Supreme Court observed that "the 'stream of commerce' metaphor carried [our Supreme Court's] decision far afield." McIntyre, supra, __U.S. at __, 131 S.Ct. at 2785, 180 L.Ed.2d at 772. The Court described the governing principle:

As a general rule, the exercise of judicial power is not lawful unless the defendant "purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws."
[Ibid. (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283, 1298 (1958)).]

The Supreme Court emphasized that, although exceptions exist, when the general rule is applicable, "the so-called 'stream-of-commerce' doctrine cannot displace it." Ibid.

There is a limited form of submission to a State's authority for disputes that "arise out of or are connected with the activities within the state[.]" Int'l Shoe, supra, 326 U.S. at 319, 66 S.Ct. at 160, 90 L.Ed. at 104. By "purposefully avail[ing] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws, " McIntyre, supra, U.S. at, 131 S.Ct. at 2787-88, 180 L.Ed.2d at 774 (quoting Hanson, supra, 357 U.S. at 253, 78 S.Ct. at 1240, 2 L.Ed.2d at 1298), a party submits to the judicial power of that State "to the extent that power is exercised in connection with the defendant's activities touching on the State." Id. at, 131 S.Ct. at 2788, 180 L.Ed.2d at 775.

The Court acknowledged its prior statement that "placing goods into the stream of commerce 'with the expectation that they will be purchased by consumers within the forum State' may indicate purposeful availment." Ibid. (quoting World-Wide Volkswagen, supra, 444 U.S. at 298, 100 S.Ct. at 567, 62 L.Ed.2d at 502). However, the Court cautioned, "that statement does not amend the general rule of personal jurisdiction." Ibid. The Court instructed that the "principal inquiry . . . is whether the defendant's activities manifest an intention to submit to the power of a sovereign[, ]" and explained:

Sometimes a defendant does so by sending its goods rather than its agents. The defendant's transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum; as a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State.
[Ibid. (emphasis added).]

See also Oticon, Inc. v. Sebotek Hearing Sys., LLC, 865 F.Supp.2d 501, 513 (D.N.J. 2011) ("[T]here is no doubt that [McIntyre] stands for the proposition that targeting the national market is not enough to impute jurisdiction to all the forum States."). The Court further emphasized, "it is the defendant's actions, not his expectations, that empower a State's courts to subject him to judgment." McIntyre, supra, __U.S. at __, 131 S.Ct. at 2789, 180 L.Ed.2d at 776.

In arguing that Garff's activities are sufficient to impute jurisdiction, plaintiffs rely upon cases decided before McIntyre that applied the broader theory of "stream of commerce" suggested by World-Wide Volkswagen that was rejected by the Supreme Court in McIntyre. Although it is entirely possible for a party to purposely avail itself of the benefits of a forum state by activities conducted outside that state, such as by sending its goods or agents to the forum state the party's activities must purposely "target[] the forum[]" McIntyre supra U.S. at 131 S.Ct. at 2788 180 L.Ed.2d at 775 As the Supreme Court instructed jurisdiction cannot be exercised over a party who merely "might have predicted that its goods will reach the forum State" as a result of its activities outside the state Ibid

It is undisputed here that Garff is a franchise dealer for Mercedes-Benz that its business is in Utah and that it took no "targeted" action to send the vehicle to New Jersey or to participate in any commercial transaction conducted here Garff's association with parties who did take such targeted action is insufficient to provide a basis for the exercise of jurisdiction


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