Supreme Court Rejects Manufacturer’s Attempt to Limit State Court Liability

In a case with implications for the home building industry, the U.S. Supreme Court last week affirmed the judgments of the Montana and Minnesota Supreme Courts in a pair of cases in which Ford Motor Company argued that plaintiffs should not be allowed to bring defect suits in states where Ford said it did not have a sufficient connection. NAHB filed an amicus brief in support of the plaintiffs in the underlying lawsuits.

The question presented to the Supreme Court was whether a state court may exercise specific personal jurisdiction over the manufacturer of a defective product when the manufacturer: (1) placed the product into the stream of commerce intentionally; (2) the product caused the plaintiff’s injury in the forum state; and (3) the manufacturer, through its actions, indicated an expectation that the product at issue be purchased or used in the forum state.

In an 8-0 vote (Justice Barrett did not participate), the Supreme Court held, in an opinion written by Justice Kagan, that, “When a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit.” Both cases involved residents who were injured (one fatally) in vehicles that were initially bought out of state.

Ford contended that it could only be sued in a state if the original sale of the specific item at issue in the case occurred in the state where the case was brought. NAHB filed its brief out of concern that if Ford’s argument was accepted, then out-of-state manufacturers of building products, especially foreign manufacturers, could escape responsibility for damage caused by their defective product if they were not subject to the courts’ jurisdiction in the particular state where the injured home owner brought suit.

NAHB argued that those who manufacture products and bring them to market expecting that they will be sold all over the United States — including those who do so from abroad — can be asked to answer claims arising from those products wherever they cause injury in the country, even if the particular item involved first entered the stream of commerce somewhere else.

The ruling will relieve intermediate businesses (like home builders) of the need to maintain pointless paper trails tracing, for example, a particular pipe in a particular house back to a particular sale delivered in a particular state. And it will provide those businesses with some certainty that, when asked to answer for the products or services they sell in a particular forum, the upstream manufacturers or sellers that are intentionally supplying that market with defective products can be asked to answer in the same forum as well.

The cases, consolidated in the Supreme Court opinion, are Ford Motor Company v. Montana Eight Judicial District Court et al, and Ford Motor Company v. Adam Bandemer.