June 21, 2013
C&K AUTO IMPORTS, INC. and C&K AUTO IMPORTS SOUTH, INC., Plaintiffs-Respondents,
DAIMLER AG and GARFF ENTERPRISES, INC., d/b/a KEN GARFF IMPORTS, Defendants-Respondents, and CROSSROADS MERCEDES BENZ OF LYNCHBURG VIRGINIA, INC. Defendant-Appellant, and MERCEDES BENZ USA, LLC, MERCEDES BENZ FINANCIAL, THE YOKOHAMA TRADING COMPANY, LLC, TOM SEKIGAMI, Individually, DEALER GUARD and INTREPID INSURANCE COMPANY, Defendants.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 28, 2013
On appeal from an interlocutory order of Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-4922-12.
Gary Ahladianakis argued the cause for appellant (Montgomery, Chapin & Fetten, PC, attorneys; Robert C. Chapin, of counsel; Mr. Ahladianakis, on the briefs).
Ian J. Hirsch argued the cause for respondents, C&K Auto Imports, Inc. and C&K Auto Imports South, Inc. (Law Offices of Ian J. Hirsch & Associates, LLC, attorneys; Mr. Hirsch, on the brief).
Before Judges Espinosa and Guadagno.
We granted defendant CrossRoads of Lynchburg, Inc. (CrossRoads) (improperly impleaded as Cross Roads Mercedes Benz of Lynchburg, Virginia, Inc.) 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.
This action concerns a 2008 Mercedes Benz CL65 AMG twelve-cylinder Bi Turbo two-door coupe, Vehicle Identification Number WDDEJ79X58A012250 (the vehicle). Mercedes Benz USA, LLC (MBUSA) sold the vehicle for $200, 775 to Garff Enterprises, Inc., d/b/a/ Ken Garff Imports (Garff),  a franchise dealer of Mercedes Benz automobiles doing business in Salt Lake City, Utah. On October 18, 2007, the vehicle was leased to a person or persons identified in the complaint as John Does 1-10, with title remaining in Daimler Title Company o/b/o Daimler Trust.
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, which in turn sold the vehicle to C&K Auto Imports, with an address in Lighthouse Point, Florida, and was shipped directly to that address 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 CrossRoads filed a motion to dismiss the complaint on jurisdictional grounds. The documents submitted in support of that motion included a certification from Gail Orange, Title Clerk for CrossRoads, which included the following assertions:
Crossroads is a Virginia motor vehicle dealer whose only place of business is located at 2643 Lakeside Drive, Lynchburg, Virginia.
Crossroads purchased the subject vehicle through an auction in Las Vegas, Nevada by way of an online purchase.
The subject vehicle was shipped from the State of Nevada by Crossroads directly to C&K Auto Imports in the State of Florida.
Crossroads never maintained any physical possession of the subject vehicle prior to or during its purchase by C&K Auto Imports.
Crossroads has no place of business or any physical presence in the State of New Jersey. Crossroads does not own or have any financial interest in any showrooms, dealerships or any property in the State of New Jersey.
Crossroads does not have any offices, employees or agents and does not otherwise perform any business in the State of New Jersey.
Plaintiffs did not dispute any of these factual assertions in opposing the motion. Rather, they contended that personal jurisdiction could properly be exercised over CrossRoads pursuant to a "stream of commerce" 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 CrossRoads's motion. In this appeal, CrossRoads argues that the trial court erred in doing so because there is no basis for the exercise of personal jurisdiction over CrossRoads in New Jersey and because the court misapplied the stream of commerce theory. 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. As alleged in the complaint, CrossRoads's relevant actions occurred entirely outside New Jersey -- purchasing the vehicle online from an auction conducted in Las Vegas and shipping it to plaintiffs in Florida -- and had revealed no intention to subject its conduct to the jurisdiction of our courts. The assertion of jurisdiction is based on the theory that CrossRoads 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 __US at__, 131 S.Ct. at 2789 180 L.Ed.2d at 776.
In arguing that CrossRoads'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 __US 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 CrossRoads is a motor vehicle dealer located in Virginia that has no business activities in New Jersey and that it took no "targeted" action to send the vehicle to New Jersey or to participate in any commercial transaction conducted here.