Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty. – Oral Argument – November 05, 1986

Media for Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty.

Audio Transcription for Opinion Announcement – February 24, 1987 in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty.

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William H. Rehnquist:

Do you pronounce your name “Stare-ing”?

Graydon S. Staring:

“Starring”.

William H. Rehnquist:

“Starring”, okay.

They have two dots over the “a” and I wasn’t sure just how that figured out.

Graydon S. Staring:

I’m not sure how they got there.

Mr. Chief Justice, may it please the Court:

Narrowly viewed, this case arises from a dispute over a supply contract between two foreigners abroad.

A different and broader view was taken of the case by the Respondent and by the California Supreme Court, as a case affecting the potential tort and indemnity claims of Californians.

Even if this Court were to decide the case upon the narrowest of grounds, we think it could not very well ignore the implications which the case might have for the tort suits of injured parties in America.

I therefore do not address the case with the intent to neglect that broader issue, but instead would propose to address it on that issue, rather than the narrower one.

Both parties here start with World-Wide Volkswagen.

That case, as you well know, is an interstate case rather than a case involving an international relationship or a foreign defendant.

I think that members of this Court have not been completely at ease with the emphasis upon the concept and term “sovereignty” in the analysis of the problem in World-Wide Volkswagen.

That analysis can probably be validly taken as a reverse view of the individual rights which are intended to be preserved by the due process clause, and indeed I have seen that view taken.

Here in this case, however, by contrast with World-Wide Volkswagen, we have an attempted projection of state power internationally.

We have, I think, therefore an authentic case for analysis in the traditional terms of sovereignty, as we are dealing not only with an express clause of the Constitution, albeit a terse one, but with the problem of considering standards of international law and comity.

Perhaps the conclusion that we urge here could be reached on the basis of such international standards and without reference to the due process clause.

We don’t urge that.

We see no need to, and we don’t think it’s desirable.

Questions which arise domestically and questions of personal jurisdiction which arise internationally should, if possible, be resolved with similar analyses.

These analyses in our view would be inconsistent only in respect of the element of this Court’s power to control reception and enforcement within the United States and this Court’s function of distributing to some extent the judicial business within an interstate federal system.

And of course, therefore, in the international case it would be necessary, we think, to take account of the lack of that power and the lack of that function in the international sphere, and in that sphere to give some heed to the views of others abroad in connection with our international powers.

Harry A. Blackmun:

Mr. Staring, straighten out a couple of details for me.

Are there any other cross-claims filed against you in this case by California citizens?

Graydon S. Staring:

There are none in this case, but there are other cross-claims in other cases not before the Court, not this identical case.

They exist.

Harry A. Blackmun:

And it has nothing to do with this accident?

Graydon S. Staring:

Yes, they arise from this accident.

Harry A. Blackmun:

I see.

Graydon S. Staring:

Yes.

Harry A. Blackmun:

Is there a choice of law clause in the contracts between your client and Cheng Shin?

Graydon S. Staring:

We have no knowledge of that.

Harry A. Blackmun:

Thank you.

Graydon S. Staring:

The record shows nothing as to it.

We are not suggesting, by the way, that this Court in this case should announce a rule of international law or a standard of international conduct.

That would be uncalled for.

It is, I suppose, a proposal of that nature which the Respondent suggests in urging the affirmance below at one point in its brief.

What we do say is that international considerations call for a heightened scrutiny of the necessary contacts, ties, or relations to establish personal jurisdiction, and we do urge that a case of this character is not one in which the scope of the jurisdiction of our state courts over manufacturers abroad should be extended.

We would not even urge that there should be such an extension if our client were a domestic manufacturer of components, but that is not the situation here.

It is a foreign, an alien manufacturer, and we think this is not… such a case is not a case for an extension such as the Supreme Court of California has given to World-Wide Volkswagen.

Harry A. Blackmun:

Would you be making the same argument if the original Plaintiff had not settled?

Graydon S. Staring:

Yes.

Yes, I don’t see why not.

May I add, Justice Blackmunn, that the original Plaintiff did not sue my client Asahi here.

Harry A. Blackmun:

Yes, that’s correct.

Graydon S. Staring:

But had it done so, we would be making the same argument.

As I said at the outset, I did not wish to take refuge solely in the narrow view, in the narrow issue in this case raised by the fact that it pertains to a contract between two parties in the Far East.

I do not waive that issue, but I think the broader issue has to be seen by the Court.

The focus of attention under World-Wide Volkswagen in this case has been on the stream of commerce doctrine.

We don’t know where the headwaters of that stream are and we have no map to show us.

But we assume for our purposes here that Asahi delivered products into that stream or some tributary of it.

We don’t accept, however, the Respondent’s further suggestion, that a component maker in the position of Asahi here is somehow or other especially responsible for that stream, as though it were the original spring.

That is an unrealistic view, we suggest, both commercially and legally.

This Court in referring to the significance of delivering products into the stream of commerce in World-Wide Volkswagen added, however, the important qualification that they must be so delivered with the expectation that they would be sold to consumers in the forum state.

The Court went on to say that foreseeability or mere foreseeability of their reaching the forum state was not enough.

The Supreme Court of California chose to deal with the case not in terms of foreseeability, the term “foreseeability” which this Court had used, but rather in terms of awareness, and there has been some argument in the briefs about the difference between the two.

I would not bandy words here about foreseeability and awareness, but would suggest instead that at this point we look at the evidence, the very brief, the very simple evidence in the record, which was found sufficient below to sustain jurisdiction in California, because it illustrates a problem which is inherent in cases which will arise under the standard which the California Supreme Court has adopted.

Sandra Day O’Connor:

Mr. Staring, do you concede that it was foreseeable that the valves would reach California?

Graydon S. Staring:

No, I do not concede that it was foreseeable.

The evidence on it–

Sandra Day O’Connor:

You argue that foreseeability alone is not enough, anyway.

Graydon S. Staring:

–Yes, we argue that foreseeability alone is not enough.

And let me retract that.

I think that we’re prepared to argue this case and present this case to the Court in terms of foreseeability, mere foreseeability.

Sandra Day O’Connor:

By that what do you mean, that that should be the test?

Graydon S. Staring:

No, but that that should not be the test and that that is the very most, the very most which could be shown by the record here.

Antonin Scalia:

You may as well give that away, because the California court found foreseeability.

You don’t expect us to reverse that on this record, do you?

Graydon S. Staring:

I don’t ask this Court to review the facts as found by the California court.

Antonin Scalia:

And they found foreseeability.

Graydon S. Staring:

On whatever record.

Antonin Scalia:

Right.

Graydon S. Staring:

I don’t know whether they found it.

They found something that I think was at least that.

And as I say, I don’t want to bandy words about what awareness is and foreseeability.

They went pretty far with the thin record they had.

I want to go into that record, though, for a special reason.

Sandra Day O’Connor:

Do you think there has to be a different test for a component manufacturer than the primary manufacturer?

Graydon S. Staring:

I do not think that there’s any different principle which applies.

I think the principles which this Court has laid down apply to both.

We think, however, that the situation of component manufacturers is likely in most instances to be very different, and that it is possible therefore to frame a test with respect to component manufacturers which is consistent with the same principles applying to everyone else, and we have tried to do that in our brief.

The record here was very short so far as knowledge or awareness or foreseeability was concerned.

There is an affidavit which shows some conversations, unspecified.

Some time in those conversations, information was given to Asahi that Cheng Shin sold tubes worldwide and that some unspecified number or type were sold in the United States.

That’s it.

Now, Asahi’s knowledge of those meager facts is absolutely undated in reference to contract, production, delivery, or even the accident in this case, which occurred in 1978, the first year of six years in which the Plaintiff Cheng Shin collected statistics to use against Asahi in this case.

Now, that shows, we think, what kind of murk, what kind of fog, we are likely to get into in component cases under the standard which has been followed by the California Supreme Court.

We could, I suppose, have had a battle of affidavits, which could have been two or three or more affidavits.

We have one affidavit full of fog.

We could have had several foggy affidavits.

Graydon S. Staring:

And if you think about the distinction between the component manufacturer’s situation and the situation of the ultimate manufacturer and exporter, you will see how likely this area is to be foggy all the time.

In the case of the ultimate manufacturer–

Antonin Scalia:

Where do you want to end the fog?

Where would you draw the line?

Suppose I am the ultimate manufacturer, but not the exporter?

That is to say, I manufacture washing machines, the totality of them, including all of the components, and I sell the washing machine to… let’s say in Japan, to a company which I know exports them, and I know they export them to the United States, and indeed I know they export them to California.

Graydon S. Staring:

–I wouldn’t draw the distinction just on the basis of whether it was an ultimate manufacturer or an exporter.

I think the critical thing is that, whichever one it is, it seek to serve the California market, as was said in World-Wide Volkswagen, that there be some act, some act by which it positively seeks to serve that market and direct its products into that market.

And so it will depend upon the facts in every case.

But I would say that if a manufacturer had nothing more to go on than a bit of conversation, of undocumented conversation, that an exporter sent products to the United States as well as other places, that is not the kind of activity of direction toward the California market which we think this Court intended in World-Wide Volkswagen and which is consistent at least with other decisions of the Court.

Antonin Scalia:

If I understand you, I have to be the one who sends the thing into the market.

Is that where you’re drawing the line?

I have to be the one that sends it?

It’s not enough that I know I am delivering it to someone who will send it there?

The sending of it there has to be my doing?

Graydon S. Staring:

No, Justice Scalia, I do not contend that.

I do say, though, that you must at least do some act by which you encourage the sending of it there, by which you seek to serve that market.

You must do something more than respond to an order which is unspecific as to where the product is going to go.

Antonin Scalia:

Well, now you’re getting foggy.

See, I suddenly don’t see the line any more.

Why isn’t it encouraging the sending it there to deliver the equipment knowing that once I deliver it it’s going to be sent there?

If we had a law of accessory applicable to this, I’d certainly be an accessory to the sending of it there, wouldn’t I?

Graydon S. Staring:

I must beg off any response on criminal law.

But I would have thought that to be an accessory under the criminal law it would be necessary to have more knowledge, more scienter than that.

I don’t know.

Byron R. White:

Well, does the record show what percentage of Cheng Shin’s… is that the name, Cheng Shin?

Graydon S. Staring:

Cheng Shin.

Byron R. White:

Cheng Shin’s valves are purchased from your client?

Graydon S. Staring:

It does not show it.

Byron R. White:

So that it does show that Cheng Shin bought from other suppliers?

Graydon S. Staring:

Yes.

Byron R. White:

So your client just supplied part of the demand–

Graydon S. Staring:

That’s right.

Byron R. White:

–for that particular company?

Graydon S. Staring:

That’s right.

Byron R. White:

And so some of his valves might have gone to California and perhaps none of them did?

Graydon S. Staring:

Exactly.

That is exactly the situation.

We don’t know from the record what portion of valves were bought from us and what portion were bought from–

John Paul Stevens:

We do know there were quite a few, don’t we?

We do know it was something like a quarter of a million that were sold in California?

Graydon S. Staring:

–We don’t know that from this record, no.

Byron R. White:

Not their valves.

Graydon S. Staring:

Beg your pardon?

Byron R. White:

There were that many tires sold.

Graydon S. Staring:

Tires, I think.

John Paul Stevens:

And didn’t they all have your client’s valves?

Graydon S. Staring:

No, we don’t know the number of valves.

John Paul Stevens:

Wouldn’t your client know that?

Graydon S. Staring:

No, because the component manufacturer puts his valves in inventory, he ships them to the ultimate manufacturer, they go through his inventory.

At some time or other, he takes them out and sends them on.

John Paul Stevens:

He must have some idea what’s going to happen to those.

I mean, you have salesmen who talk to your customers, I suppose, and they find out what their needs are and what kind of products they need, don’t they?

Graydon S. Staring:

I think that the realistic situation in an industrial situation of this sort is a little different, and that there are more likely to be supply contracts and shipments from one country to another under supply contracts, rather than door to door salesmen.

Harry A. Blackmun:

Well, doesn’t the record show an investigation and finding of your valves in California?

Graydon S. Staring:

The record contains affidavits in which a lawyer in Sacramento has said that he identified quite a number of our valves on tires in California.

Harry A. Blackmun:

Is that improper material in the record?

Graydon S. Staring:

Yes, we think so.

We think this is really to be disregarded.

And we don’t think that, incidentally, that the lower court or that the California Supreme Court indicated any great reliance upon that.

Harry A. Blackmun:

I’m not sure about great reliance, but does the record show the presence of your valves in the state of California?

Graydon S. Staring:

The record shows that valves identified as ours have been found in the state of California in the year 1983.

I believe that’s the year in which they’re said to have been found.

Harry A. Blackmun:

That’s my impression.

Graydon S. Staring:

That’s right, 1983.

This accident happened in 1978, and we are talking, I hope, about contemporaneous knowledge when we seek to impose jurisdiction upon someone for–

John Paul Stevens:

Well, if you find the registered agent today you could serve him today, couldn’t you?

I mean, for personal jurisdiction isn’t it your presence at the time you’re sued?

Graydon S. Staring:

–Well, that is not, however, at the heart of the stream of commerce doctrine as we understand it.

We don’t deal here with any question of general jurisdiction over Asahi in California, and I don’t think there’s any contention that anyone even would dare to contend that the presence of some Asahi valves in California would constitute Asahi’s presence there.

So it’s necessary here for Cheng Shin to prevail, if it does at all, on the stream of commerce doctrine, and that involves–

Byron R. White:

Well, your client at least knew that Cheng Shin’s tires were being sold in the United States?

Graydon S. Staring:

–The record shows that we were told that at some time.

Byron R. White:

Yes, and the only thing… and you knew that there’s a chance then that some of your valves would get to California.

But there was a chance… there also was a chance, I suppose, that none of them would, because you didn’t supply all of the valves for Cheng Shin?

Graydon S. Staring:

It must be taken… yes, it must be taken that we had a mere… an awareness of a mere likelihood, and that is all, a mere likelihood at most that some valve of ours might find its way to California.

And the statistics gathered afterward show that on the probability basis it was unlikely, rather than likely.

We have no more than that.

John Paul Stevens:

Unlikely?

I thought the evidence was there were 500,000 of your valves that were sold by Asahi to Cheng Shin in one year.

And you think it’s unlikely that any of those went to the United States when you know they’re doing business in the United States?

Graydon S. Staring:

Well, the evidence of that–

John Paul Stevens:

Wasn’t there a sampling of one county and about half of the valves there came from your client?

Graydon S. Staring:

–There was an affidavit showing, as I said, that in 1983–

John Paul Stevens:

I understand.

Graydon S. Staring:

–there were a number of valves found which were identified as Asahi’s, tentatively by the way.

I would like to point out, because this is, again, one of the vices inherent in this sort of thing, that it is still disputed whether the valve in this case was ever made by Asahi.

Asahi has now inspected the valve and says, no, it’s not ours.

So we have yet to get, presumably, to some point in a trial where it may finally be established whether the component was or wasn’t made by the component maker.

And then perhaps if the answer is no we can get out on a lack of jurisdiction.

Graydon S. Staring:

I don’t know.

William H. Rehnquist:

Well, I don’t see where you’d get out on a lack of jurisdiction.

I mean, supposing I sued the Ford Motor Company in California and I said, this car that you made for me is really loused up, and their answer is, well, it’s not a Ford.

Well, it may turn out not to be a Ford, but that doesn’t mean the California courts didn’t have jurisdiction over Ford.

It means I lose the case on the merits.

Graydon S. Staring:

I agree with you, Chief Justice Rehnquist.

And this really heightens the injustice of it, that jurisdiction should be established on such a thin premise.

William H. Rehnquist:

Well, don’t you have a right to test… supposing you think this affidavit is foggy or you think it doesn’t say as much as you think it ought to.

You have a right to take that person’s deposition, don’t you?

Graydon S. Staring:

Yes, we do, Your Honor.

William H. Rehnquist:

And did you choose to avail yourself in this case?

Graydon S. Staring:

And we did not do it.

We did not do it, and I repeat that I think what the record here shows is the inherent fogginess of this kind of case.

We would have gotten simply more vague and speculative indications.

John Paul Stevens:

But Mr. Staring, isn’t the fogginess partly due to the fact that the affidavit of Asahi’s president is perhaps not as detailed as it might have been?

Couldn’t he have spelled out in detail just how much knowledge they had of the ultimate destination of these valves?

And didn’t do that.

He just said he knew he sent some to Taiwan, and he doesn’t say anything about what he knew was going to happen later.

Isn’t that right, or maybe I’m misstating the affidavit?

Graydon S. Staring:

No, I think, Justice Stevens, that you’re correct.

But I think you have to look at the limitations upon one executive in an affidavit which, if it’s to serve any purpose, has to be inherently negative.

Someone comes in and says: Over the lunch table, I told these people once this.

And what do we do?

We come back and say, I never heard it, I don’t remember it, I don’t remember this incidental fact?

If the… when we turn by contrast to the case of the primary manufacturer and shipper and to cases where jurisdiction has been found in the past, we find objective… we’re going to find objective acts, objective documented transactions.

We’re not going to find this kind of foggy situation.

John Paul Stevens:

Well, let me ask you this question.

As a legal matter, supposing your opponent took the president’s deposition and said: Mr. President, what do you know about the distribution of your products in the United States?

And he said: Well, we don’t ship anything directly to the United States; we send everything to Taiwan; we do understand that they send about 100,000 or 200,000 or a million dollars worth of our product into California.

That’s purely at their decision, but we do know that happens.

John Paul Stevens:

Would there be jurisdiction or not?

Graydon S. Staring:

I think there would not, Justice Stevens.

John Paul Stevens:

So there doesn’t have to be fogginess.

You have a real cleancut position if you want to make it.

You’re not arguing that.

Graydon S. Staring:

If you have that situation, yes.

But I don’t think there would be jurisdiction, and I don’t think–

Byron R. White:

So that would be the same if your client knew that they supplied 100 percent of the requirements of the tire manufacturer and they knew that every tire that that manufacturer sent into California had your valve in it?

You would say no jurisdiction?

That’s the same question as Justice Stevens asked.

Graydon S. Staring:

–If I may repeat it to be sure I understand it, this is that we have knowledge we supply all the valves to Cheng Shin–

Byron R. White:

Yes.

Graydon S. Staring:

–and we have knowledge that they ship their tires with our valves into California.

Byron R. White:

And that every tire that they ship to California has your valve in it.

Graydon S. Staring:

All right.

I will say that in that case we have certainly foreseeability and we have more than mere foreseeability.

Byron R. White:

Well, that’s the same question, though, that Justice Stevens asked you.

Graydon S. Staring:

But there is another… I do not concede there is jurisdiction because we have to look at other possibilities.

Suppose that all we do is to supply valves which are in accordance with the specifications which are given us.

It is not realistic, it is not reasonable, it is not consistent with International Shoe, it is not fair play and substantial justice, to require everyone who supplies a part abroad in response to an order or specifications to make inquiries and to attach the ultimate legal and jurisdictional significance to the possibilities of where those parts may go.

John Paul Stevens:

Well, maybe that’s a defense on the merits, that you just did exactly perform your contract.

But supposing you knew they filled the specifications, you also knew that they were going to explode as soon as they were put in motion on a motorcycle, or there were fireworks or something.

Would you still say no jurisdiction at all?

Graydon S. Staring:

The difficulty as a practical matter with that, Justice Stevens, is that you don’t know what the ultimate manufacturer is going to do or how he’s going to do it, what products he’s going to put it into and what products he’s going to say it should be used on, a bicycle or a high speed motorcycle.

You are very far out of control of all of those things.

If I have a minute, I should like to say that I submit that this situation of Asahi does not conform to that fair play and substantial justice which this Court has said is the principal guideline in cases of this sort.

Thank you.

William H. Rehnquist:

Thank you, Mr. Staring.

We’ll hear now from you, Mr. Haven.

Ronald R. Haven:

Mr. Justice Rehnquist, members of the Court:

Ronald R. Haven:

I’d like to point out first of all, getting right into the factual background of this case, that the record is totally devoid of there being any contract whatsoever between the parties.

There’s no indication of anything more than the fact of a sale, the terms of which have not been made a part of this record.

Let me point out that when the motion to quash was initially heard back in 1983, the last declaration to come in in support of the motion to quash was from Mr. Matsoko in support of the motion.

He is with Asahi.

There was never any mention made of any contract in the course of his affidavit, nor in his affidavit were there any denials of any kind that Asahi was aware of the fact that Cheng Shin and other manufacturers distributed in the United States and in California.

He had ample opportunity to make that denial if he chose to do so, and it was never done.

Therefore, up until the point of the reply brief in this case it has always been taken by the court as a given, if you will, that Asahi was well aware of the distribution system of Cheng Shin, which included the United States and California.

It was also taken by the court as a given that Asahi was fully aware of the fact that the distribution system of Honda, Bridgestone, Yokahama, IFC, and others included the United States and California.

It is also a matter of common knowledge.

It would be commercially unreasonable to accept the proposition that Asahi is selling one and a quarter million valves to Cheng Shin over the course of a five year period, 150,000 in ’78, 500,000 in ’79, 500,000 in 1980–

How many tires did they make?

Ronald R. Haven:

–How many tires did Cheng Shin make?

I don’t have that information.

I don’t know what percentage of Asahi’s valves went onto Cheng Shin’s tires.

Well, it might have been only half of one percent.

Ronald R. Haven:

It might have been a half of one percent, but that’s still a lot of valves.

It might be a lot of valves, but it certainly reduces the chance that any of those valves got to the United States, especially when only 20 percent of the business of Cheng Shin came from California.

Ronald R. Haven:

20 percent of Cheng Shin’s business in the United States comes to California.

Well, how does anybody know that any of–

Ronald R. Haven:

Nobody could say absolutely that they knew that one of their valves would in fact–

–The odds are even against it.

Ronald R. Haven:

–I beg your pardon?

The odds are against it, just on the figures.

Ronald R. Haven:

The percentage odds are against it.

However, we found that a lot of them are here, or a lot of them are in California, anyway.

Maybe ten.

Ronald R. Haven:

No, there’s a lot more than that, something like 267.

Nevertheless, in terms of whether Asahi should have anticipated that its products were regularly going to arrive in California, that’s a different question.

Ronald R. Haven:

If Asahi knows that Cheng Shin and other worldwide distributors of tire tubes are distributing in the United States and specifically in California, and Asahi continues year after year after year to sell–

To sell.

Ronald R. Haven:

–they take advantage of a systematic method of distribution that they know covers the United States and California, and I think that rises to the level of an expectation.

Does Cheng Sing, is it?

Ronald R. Haven:

Cheng Shin, I believe.

Cheng Shin, sell its tires in the United States to motorcycle manufacturers, or does it put them directly on the tire market?

Ronald R. Haven:

To the best of my knowledge, they sell replacement tubes.

I know that they also sell some bicycle tubes that come on Schwinn bicycles.

These are tubes that go inside of tires?

Ronald R. Haven:

Right.

We’re talking about the tube.

We must remember that the valve is really the only mechanical part of the tube.

It’s a very significant part.

The rest of the tube is nothing other than an air-filled rubber donut.

The one mechanical part is the valve that goes on it.

And the valve stem itself is supplied to Cheng Shin already attached to an oval rubber base, and it’s that rubber base that is melded into the tube itself.

And in this case, the question of fact at the time of trial is going to be whether there’s a defect solely within the valve unit itself.

Well, who does Cheng Shin… does it sell to tire manufacturers?

Ronald R. Haven:

Cheng Shin does sell to some tire manufacturers, yes.

It also sells replacement parts that are stocked directly in distributors’ warehouses, such as the Hon Cycle Center in Sacramento County, which was the subject of one of our inspections.

So it’s valve to tube to tire to motorcycle?

Ronald R. Haven:

Well, the tube goes inside the tire.

The tube is not… the tube and the tire are not sold as one unit.

Yes, but the tube is manufactured separately from the tire.

Ronald R. Haven:

That’s true, that’s true.

And it is placed on the rim of a motorcycle, and then there is a tire placed on top of the tube.

And the tube pokes in through the rim and that’s how you put air in it, just like on your bicycle.

Now, how is this foreseeability or whatever you want to call it, awareness of the possibility, any different in kind from the awareness that the seller, that an automobile dealer has when he sells automobiles in New Jersey that they are very likely to be driven in Oklahoma?

Ronald R. Haven:

Substantial difference.

I think your dealer in New Jersey seeks to serve a certain marketplace.

He’s at the opposite end of the stream of commerce, if you will, from the component part manufacturer or the primary manufacturer.

The primary manufacturer relies, depends on for its existence service of a much wider market.

Ronald R. Haven:

It doesn’t seek to serve just New Jersey in most case.

We’re talking about somebody at the other end of the spectrum, somebody who has to serve a much broader marketplace in order to sell a lot of the product.

The equivalent of the person serving the marketplace is the person who buys the Volkswagen in New Jersey, and I know I’m selling these cars to people who travel and I know that they’re going to travel, among other places, to Oklahoma.

Yet we’ve held that Oklahoma can’t base its jurisdiction over the New Jersey company simply on the ground that somebody who bought a Volkswagen in New Jersey travels in Oklahoma with it.

Ronald R. Haven:

Well, I suppose you can say that it’s foreseeable that anybody who has any kind of a vehicle could end up in any state of the Union and perhaps Canada, Mexico, or someplace else.

But the point is that your New Jersey dealership did not seek to serve the Oklahoma marketplace, unless you find that there’s some other element.

So you think Volkswagen should have come out the same even if the seller of the vehicle had said, oh, you want a new car, where are you going?

I’m going to Oklahoma.

Have a good trip.

Ronald R. Haven:

Well, if he’s doing something to take advantage of the Oklahoma customers and getting them to come to him–

No, no.

This is just a New Jersey customer of his that says he’s going to go visit his daughter in Oklahoma.

But that nevertheless, it still leaves a New Jersey fellow who is not seeking to serve the Oklahoma market.

Ronald R. Haven:

–I don’t think that you can say that the New Jersey automobile dealer sought to serve the Oklahoma marketplace because an Oklahoman by chance, some fortuity, walks into his dealership.

Or some New Jersey person buys the car and says, I’m going to Oklahoma.

Ronald R. Haven:

It’s still a mere fortuity.

He’s not… the dealer is not seeking to serve that marketplace.

Well, nor was Asahi here.

Asahi couldn’t have cared less where these valves went.

It happened to know that it was very likely they were going to go to California, but they couldn’t care less where they went once they unloaded them and got the money for them.

They weren’t seeking to serve California any more than the Volkswagen dealer could have cared less where the person was driving his Volkswagen.

He knew he was going to probably go to Oklahoma.

In the hypothetical that Justice White just gave you, the fellow says: I am going to go to Oklahoma.

The dealer says: Well, good luck.

You’re right, he doesn’t care whether he goes to Oklahoma or not.

So he’s not trying to serve the Oklahoma market.

Ronald R. Haven:

That’s right.

And it’s the same here.

Ronald R. Haven:

And the dealership is not systematically again and again seeking to serve the Oklahoma marketplace in your analysis.

Asahi was not seeking to serve California, either.

It was just selling valves.

It couldn’t care less where the valves went.

Ronald R. Haven:

That’s right, they couldn’t care less.

They just happened to sell valves to a whole bunch of manufacturers of tire tubes that they knew serviced this marketplace.

Just the way the Volkswagen dealer knew that these people were going to be driving the car in Oklahoma.

Ronald R. Haven:

No, no.

The New Jersey dealer in your hypothetical sells one automobile to somebody who happens to be going to Oklahoma.

In this hypothetical or in this case, Asahi sells over a million valves to just one worldwide producer of tire tubes, knowing that its product is going to come to California, and it sells… in ten different years, it sells valves to Cheng Shin.

It is, as a matter of a distribution system it is indirectly benefiting from what’s going on in California.

Now, you’re never going to get a case–

Even in VW, some of us were in dissent.

Ronald R. Haven:

–I beg your pardon?

I say even in VW, some of us were in dissent.

Ronald R. Haven:

That’s very true.

But I think VW is a case that is distinguishable based on the fact that we’re at a different end of the marketing spectrum.

The two entities, the local dealership and the component part manufacturer, have to serve, seek to serve different marketplaces as a matter of the way business works.

You’re never going to get a component part manufacturer case where the component part manufacturer has a direct sales relationship with the consumer, because the component part manufacturer makes nothing other than the component part that has to be put into something else before it can be utilized.

Therefore, we’re in a position where the component part manufacturer can be insulated by the nature of his business unless he’s responsible in those cases where there’s a systematic advantage being taken of a marketplace by that component part manufacturer.

He’s not insulated.

He’s just not able to be sued everywhere in the world where his component parts go.

He’s liable.

He can be sued where he can be found.

Ronald R. Haven:

He could be sued in Japan.

We’re not talking about not being able to obtain redress against the person who makes a defective valve.

It’s just a question of where you can obtain it, whether you can obtain it wherever the valve happens to turn up or whether you have to go to some place where he is located to sue.

Ronald R. Haven:

Wherever the valve happens to turn up, that’s California.

That’s what you’re saying, wherever the valve turns up.

Ronald R. Haven:

Not wherever it turns up.

I’m not suggesting that.

I’m suggesting much more.

Ronald R. Haven:

I’m suggesting much more activity being required of the component part manufacturer.

I am suggesting that the mere fortuity that one… a valve could end up on your car from New Jersey.

Let’s say that’s an Asahi valve and it happens to roll into Oklahoma or California.

That’s a fortuity.

But where you have a manufacturer of a component part who’s never going to have direct contact with the forum because he’s only going to sell to other manufacturers, when that component part regularly and systematically, because of the known distribution system of the primary manufacturer, ends up in California or some other state, that’s a different ballgame than the one isolated instance.

I would submit under the one isolated instance jurisdiction probably is not appropriate.

That would be consistent with Volkwagen.

Mr. Haven, you’re going to get to the second prong of the argument, aren’t you, having to do with fair play?

Ronald R. Haven:

Yes.

In light of the fact that what’s left in this case are two foreign corporations, really foreign corporations, the California residents, the original Plaintiffs, are out?

Ronald R. Haven:

The problem again that I have is the fact that we’re dealing with a component part manufacturer who, at least in this case, does all of its business in Japan, which means to me that if in those cases where the injured party perhaps has only one available Defendant, the valve manufacturer, that that Plaintiff may have to go to Japan to seek any redress at all.

Now, I admit that’s not this case.

We’re talking indemnity.

The Plaintiff has settled out.

The Defendants didn’t have to settle with the Plaintiff, by the way.

We could have drug the Plaintiff through all of this.

We settled, we’re seeking our indemnity, and I think California has a substantial interest in promoting not only settlements, but also promoting the indemnity which the law in California permits.

Now, in footnote one of the Petitioner’s brief is a fairly thorough summary of what the nature of the cross-complaint is.

You’ll see the cross-complaint is an equitable cross-complaint for indemnity or apportionment, as allowed by California law.

It is not a contractual indemnity cause of action.

The state of California has a substantial interest for many reasons: the accident happened there, the goods were bought in California, California has an interest in making sure safe goods come into the state, as do all the states in this Union.

There’s a lot of those that are very obvious.

But in terms of fair play and substantial justice, I think in balancing the interest of the state versus balancing the interest of Asahi weighs favorably in that of the state, because again I come back to the same notion, that Asahi regularly over the course of ten years and over the course of five years sold well over one and a quarter million valves to Cheng Shin with knowledge of its distribution system, made money off of Californians, subjected Californians to the potential of harm.

It’s the legal system in California that allows Asahi to do the business that it does there indirectly, and I don’t see why Asahi can’t come to California and defend its case.

But what interest of California remains now that the original Plaintiffs have settled?

Ronald R. Haven:

Well, for one thing, the interest that California has–

Possible future injuries?

Ronald R. Haven:

–I beg your pardon?

Possible future injuries?

Ronald R. Haven:

Well, that’s one thing.

Ronald R. Haven:

But another thing is the transaction took place in California, and under California law… Cheng Shin, by the way, submitted to the jurisdiction of California.

Cheng Shin is entitled to the benefits and the burdens of California law.

Why can’t Cheng Shin, if it’s subject to those benefits and burdens, bring its indemnity action there in California, where the main action was?

This is Cheng Shin the American subsidiary of the Taiwanese company?

Ronald R. Haven:

No, there’s a Cheng Shin U.S.A. which goes out and sells tubes to distributors, and then Cheng Shin of Taiwan sends the tubes in directly to the distributors.

So Cheng Shin U.S.A. is nothing more than an order taker.

It’s a separate California corporation.

Yes, but wasn’t it a party to the case?

Ronald R. Haven:

It was a party to the case.

And I assume–

Ronald R. Haven:

And it’s still out there and has a cross-complaint of its own.

–I assume… and I don’t know what the facts are in this particular case.

I assume in the typical situation here your American company probably has an American insurance carrier who probably settled with the Plaintiff and has a subrogation claim against the manufacturer.

Ronald R. Haven:

Well, that’s actually an indemnity claim.

But actually, Cheng Shin of Taiwan was the one that settled, because Cheng Shin U.S.A. was in an indemnity position vis a vis Cheng Shin of Taiwan.

Normally that company… normally we’d really have an insurance company that would have an interest in this.

Ronald R. Haven:

At least have an option to do so, yes.

This particular juncture in this litigation.

Ronald R. Haven:

Now, I would also point out that the retailer of the tire, of the tube more appropriately, had a cross-action against Asahi, which is not before the Court at this time because of some technical problems in terms of service and so forth, time of service and all of that.

But it’s the best of my knowledge there is another action out there waiting for the determination of this Court, because they didn’t want to go through the same appellate process that we were going through.

So there is an interest of some other California residents out there.

Of course, if you’re right that an indemnity claim such as Cheng Shin’s is always going to be able to bring in a person further back in the stream, presumably Asahi could make the same argument, if we sustain you here, if it wants to file an indemnity action against the steel manufacturer somewhere in Hong Kong from whom it bought the steel.

Somewhere the chain has got to get too thin.

Ronald R. Haven:

Well, and I think you probably hit the nail right on the head right there, because if you have a producer of a natural metal who is pulling it out of the ground and sending it to the valve manufacturer, sending it to Asahi for whatever purpose Asahi wants to make for it or make out of that particular metal, that’s a great deal different.

Well, how different is it?

I mean, this person just sends steel bars from Hong Kong to Japan, and the same conversations took place.

Asahi tells him: Yes, we send a lot of our stuff to Cheng Shin and Cheng Shin sends a certain amount to the United States.

And do you know that your steel is all over California.

Ronald R. Haven:

Your steel is all over California, and you know that your steel is being made into valve stems.

Yes.

Well, if you don’t know, we’re telling you.

Ronald R. Haven:

Okay.

Like in the last case, valve stem headed for California.

And it cracks.

And last week what really failed in an accident was your steel.

Ronald R. Haven:

Well, to the extent that a metal producer is subject to product liability law… and I’m not sure that steel itself constitutes product liability.

But to the extent that there is bubbles in the metal or it’s not tempered properly or whatever the process is–

So your answer is yes, he should be suable–

Ronald R. Haven:

–Yes.

–in California?

Ronald R. Haven:

If he knows it, if he’s taking advantage of it on a regular basis, if he’s making money off it and he knows and he continues to sell and he doesn’t do anything to protect himself from suit in California.

I don’t see why he shouldn’t be answerable in California.

He has the same opportunity to get insurance to cover him here, because he has knowledge that–

So it is never too far, it is never too remote?

Ronald R. Haven:

–Never say never.

I wouldn’t say that.

Just never find out where the person you’re selling something to intends to resell it.

I mean, that’s all he has to do to protect himself, right?

Ronald R. Haven:

Well, if you–

Ask not where your valves go.

Ronald R. Haven:

–If you stick your head in the sand, you can’t be sued where you’re making a lot of money from.

I’m not sure that that’s right, either.

I think where as a matter of commercial reality your producer has to know that he is making money from a marketplace on a regular, systematic, continued basis, I don’t see why there shouldn’t be jurisdiction.

But at least the seller of the finished product, he will always know where his products are going.

Ronald R. Haven:

And this is a valve.

A valve is a valve.

It’s got one purpose, is to be a valve, nothing more, nothing less.

Now, if he’s got a valve that’s manufactured for bicycles and is wrongfully put in a motorcycle tube, that’s a matter of liability and misuse.

However, if that valve… he’s sending valves, which is a finished, complete product that cannot be used for anything other than a valve.

We’re not talking metal.

Ronald R. Haven:

We’re talking a valve is a valve, and it can only go into a tire tube and it’s not good for anything else.

That’s the case we have here, and under these circumstances, where so many valves are in question, where so many valves were actually found in California… I want to break the train of thought for just a second here.

There has been a suggestion made that some lawyer found some valve stems that he identified as Asahi, and the implication obviously is he doesn’t know an Asahi valve from some other valve.

The declaration from Wally Chen, who is the person from Cheng Shin, is offered as Exhibit A to the Respondent’s brief, and in that appendix it specifically stated that Asahi’s logo is a capital Mr. Shepard, my partner.

As indicated in appendix B and C, that’s how he identified those valves.

There has never been any denial in any affidavit submitted on the record that the logo is not a capital “A” that is totally encircled.

There has never been any kind of an affidavit that the identification was somehow wrong based on the affidavit of Mr. Shepard.

So we know that there is 267 of those valves in California in 1983.

This accident happened in 1978.

What I’m proposing to the Court is that the continued systematic taking advantage of Cheng Shin’s system of distribution–

What evidence is there of continuous taking advantage of California?

Ronald R. Haven:

–I believe the affidavit of Asahi’s president said that they had done business with Cheng Shin over a ten year period.

And there is also a declaration–

What about, what’s the evidence that Asahi consciously was taking advantage of the California market over a period of years?

Ronald R. Haven:

–Well, they didn’t say that.

Well, what evidence is there?

Ronald R. Haven:

Well, the evidence is that they, number one, knew or at the very least should have known that Cheng Shin, Honda, and others regularly serve this market.

They’re an important cog–

Isn’t know enough?

Ronald R. Haven:

–No, I’m saying the declarations say that they knew that Cheng Shin did.

I know that.

Ronald R. Haven:

I’m also saying that it would be unrealistic to expect that they didn’t.

We’re back to where we were a while ago, that there is still the missing component of how… what percentage of Cheng Shin’s tubes contained Asahi’s valves.

You don’t know that?

Ronald R. Haven:

No, I don’t know that.

I don’t know that.

As I was going to point out, however, the sampling that we did in northern California shows that approximately 25 percent of the valves–

Well, wasn’t there a finding… was there a finding below that Asahi over a course of years was consciously taking advantage of the California market?

Ronald R. Haven:

–There is specific language in the California Supreme Court decision at at least three places–

That that’s the case, is that it?

Ronald R. Haven:

–Yes, that there was an awareness.

Asahi was aware of the distribution system’s operation and knew that it would benefit economically from the sale in California of products incorporating its components.

That’s page C11 of the appendix.

Yes, if any of them were sold there.

That’s a very general statement.

I mean, obviously they knew they would benefit from the sale of products containing their components anywhere, including California.

But that does not say to what extent it thought they were being sold or knew they were being sold in California.

Ronald R. Haven:

I can’t tell you what the percentage of tire tubes were that came into California.

I just don’t have a record of that.

What I can–

Why wouldn’t Cheng Shin have know how many Asahi valves were sold and distributed in California in the year 1978?

Why wouldn’t they have put an affidavit in the record for the year that is most critical here?

Ronald R. Haven:

–The year that’s most critical–

Or ’77, whatever you want.

Ronald R. Haven:

–’78, we do know that there were 100,000 valves sold to Cheng Shin in that year.

But how many of those came to California?

Cheng Shin ought to know.

Ronald R. Haven:

Cheng Shin might very well know.

That’s something that I just didn’t get the declaration on.

They probably don’t know, that’s the point.

Ronald R. Haven:

Well, they may very well know.

They may know that a certain percentage of their tire tubes contained Cheng Shin–

Right.

And they know how many tubes went to California.

But they don’t know how many tubes… they might not know how many tubes went to California containing Asahi valves.

Ronald R. Haven:

–They might not know that, I can’t deny that.

But they ought to know what the percentage.

First of all, they ought to know the percentage, and if you just extrapolate you ought… but they didn’t give us those figures, did they?

Ronald R. Haven:

I beg your pardon?

No, I don’t have those figures.

Ronald R. Haven:

I just don’t have them.

So the burden really is en you to sustain jurisdiction.

So it’s a hole in the record.

Ronald R. Haven:

It’s true, it’s my burden, it’s my burden.

I can’t offer you that, but I can offer you what was actually there in ’83.

And what I was going to say a minute ago is that, whether or not this accident or this valve came into California at the beginning of the time of this systematic distribution of the product or at the end of it shouldn’t matter.

It just seems to me it’s such a strange way to get this evidence, to have your partner going out looking through a bunch of valve assemblies five years later.

Ronald R. Haven:

We wanted to establish that they were in fact in California.

Yes.

Ronald R. Haven:

The only thing I would ask is that the Court take cognizance of the cases below, all of which are cited in the briefs, which point out the significance of awareness of distribution systems and consider those facts in coming to your decision.

In closing, I can only say that it doesn’t seem to me to be appropriate, where in fact the component part manufacturer who is in a unique position can insulate itself from having to appear within the forum simply because it will never have contact directly with the forum.

A component part manufacturer is in a unique position.

It makes all of its sales some place else.

It’s never going to be selling directly to the consumer.

And it’s necessary for the Court to devise a way or certain circumstances under which those people can be held accountable for the safety of their products in our state and in all the states.

And I would suggest–

That can always happen with somebody that doesn’t know that it’s going to be brought in.

I mean, you can have somebody who is negligent as can be in the manufacture of something more dangerous than a valve, let’s say an airplane, okay, and he doesn’t know that the airplane’s going to be used in the United States, and he sells it to someone who then brings it to the United States and it’s used here.

Now, it’s very easy for that to hurt somebody in the United States, and you wouldn’t assert that the mere fact that he manufactured the product that was used here is enough to enable him to be sued here, right?

Ronald R. Haven:

–No, not at all, not at all.

But where that company manufactures those airplanes knowing that they’re going to be coming here, it’s a different ballgame.

That’s a different set of circumstances, and if you’ve got–

And it isn’t the fact that the injury occurred here alone that makes it an appealing case.

Ronald R. Haven:

–I’m sorry?

It isn’t the fact that the injury from the defective product occurred here, it is not that fact that makes it an appealing case for the assertion of jurisdiction.

Ronald R. Haven:

Not that alone.

There has to be some voluntary–

Ronald R. Haven:

There has to be more.

–submission to the jurisdiction.

Ronald R. Haven:

There has to be purposeful availment, are the key words I believe, of the benefits and protections of the laws of the state.

Ronald R. Haven:

And I am submitting that awareness and continued, the continued taking advantage, the continued selling of these valves to Asahi, with the awareness that they were coming into the state, which is I think what the declaration says, I submit that that is purposeful availment within the meaning of due process.

William H. Rehnquist:

Thank you, Mr. Haven.

Mr. Staring, you have one minute left.

Do you wish to use it?

Graydon S. Staring:

Just a few seconds of it, if I may make one final observation.

And that is that the doctrine laid down by the California Supreme Court and urged of course by the Respondent here is one which places Cheng Shin or any manufacturer similarly situated in complete control of the question of jurisdiction over the component maker, according to whether it discloses or doesn’t disclose some seemingly incidental fact.

And we submit that that is not consistent with the predictability which this Court has held is supposed to be preserved by the due process clause.

Thank you very much.

William H. Rehnquist:

Thank you, Mr. Staring.

The case is submitted.

The honorable court is now adjourned until Monday next at ten o’clock.