Asahi Metal Industry Co., Ltd. v. Superior Court

• Decision Date: 25 July 1985
• Docket Number: S.F. N
• Citation: 216 Cal.Rptr. 385,39 Cal.3d 35,702 P.2d 543
• Court: California Supreme Court
• Parties: , 702 P.2d 543, 54 USLW 2087, Prod.Liab.Rep. (CCH) P 10,708 ASAHI METAL INDUSTRY CO., LTD., Petitioner, v. The SUPERIOR COURT of Solano County, Respondent; CHENG SHIN RUBBER INDUSTRIAL CO., LTD., Real Party in Interest. o. 24657.

Page 385

216 Cal.Rptr. 385

39 Cal.3d 35, 702 P.2d 543, 54 USLW 2087,

Prod.Liab.Rep. (CCH) P 10,708

ASAHI METAL INDUSTRY CO., LTD., Petitioner, v. The SUPERIOR COURT of Solano County, Respondent CHENG SHIN RUBBER INDUSTRIAL CO., LTD., Real Party in Interest.

S.F. No. 24657.

Supreme Court of California In Bank.

July 25, 1985.

David W. Condeff, Richard D. Hoffman and Lillick, McHose & Charles, San Francisco, for petitioner.

No appearance for respondent.

Ronald R. Haven and Shepard & Haven, Sacramento, for real party in interest.

Michael J. Breining, Sacramento, Robert E. Cartwright, San Francisco, Leonard Sacks, Encino, Wylie A. Aitken, Santa Ana, Glen T. Bashore, North Fork, Ray Bourhis, San Francisco, Richard D. Bridgman, Oakland, Edwin Train Caldwell, San Francisco, David S. Casey, Jr., San Diego, Douglas K. de Vries, Sacramento, H. Greig Fowler, San Francisco, Sanford M. Gage, Ian Herzog, Los Angeles, G. Dana Hobart, Marina Del Rey, Stanley K. Jacobs, Los Angeles, Harvey R. Levine, San Diego, John C. McCarthy, Claremont, Timothy W. Peach, San Bernardino, Joseph Posner, Los Angeles, John M. Van Dyke, Fullerton, Arne Werchick, Sausalito, Stephen I. Zetterberg, Claremont, Fischer & Hill, Dennis A. Fischer, Santa Monica, and Melissa Hill, Los Angeles, as amici curiae on behalf of respondent and real party in interest.

BIRD, Chief Justice.

Can California constitutionally exercise personal jurisdiction over a manufacturer of component parts who made no direct sales in California but had knowledge that a substantial number of its parts would be incorporated into finished products sold in the state?

I.

In 1978, Gary Zurcher was severely injured when he lost control of his Honda motorcycle and collided with a tractor rig. His passenger and wife, Ruth Ann Moreno, was killed. The accident was allegedly caused by a sudden loss of air and an explosion in the rear tire of the motorcycle. Both Zurcher and Moreno were California residents. The collision occurred on a California highway.

Zurcher filed a products liability action alleging that the motorcycle tire, tube, and sealant were defective. Zurcher's complaint named, inter alia, Cheng Shin Rubber Industrial Co., Ltd. (Cheng Shin), the Taiwanese manufacturer of the tube, and Sterling May Company, Inc., the California retailer. Cheng Shin, in turn, filed a cross-complaint seeking indemnity from its codefendants and from Asahi Metal Industry Co., Ltd. (Asahi), the manufacturer of the tube's valve assembly.

Asahi is a major Japanese producer of valve assemblies. Its product is incorporated into tubes sold throughout the world, including tubes sold to the large motorcycle manufacturers. The declarations presented to the trial court established that Asahi has the following contacts in California.

For 10 years, Asahi has done business with Cheng Shin, a tube manufacturer that makes 20 percent of its United States sales in California. Between 1978 and 1982, Asahi sold 1,350,000 valve assemblies to Cheng Shin. Such sales represented 1.24 percent of Asahi's gross income in 1981 and .44 percent of its gross income in 1982. In addition, Asahi valve assemblies are incorporated into the tubes of numerous other manufacturers selling tubes in California. ¹

Asahi moved to quash service of summons. The trial court denied the motion, finding that Asahi had the requisite minimum contacts with California and that jurisdiction was fair and reasonable. The trial court relied on (1) the significant number of tubes with Asahi valve assemblies sold in California, (2) the number of valve assemblies Asahi sold to Cheng Shin, (3) Cheng Shin's substantial business with California, and (4) Asahi's knowledge that its valve assemblies would be incorporated into tubes sold in California.

Asahi now seeks a writ of mandate compelling the trial court to grant its motion to quash service of summons.

II.

California's long-arm statute provides that it can exercise jurisdiction "on any basis not inconsistent with the Constitution of this state or of the United States." (Code Civ.Proc., § 410.10.) Asahi contends that its connection with California does not warrant jurisdiction. It cites the due process clause of the Fourteenth Amendment of the United States Constitution, which bars the states from entering judgments affecting the rights or interests of a nonresident defendant absent such "minimum contacts" with the state that "the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 [hereafter International Shoe ], quoting Milliken v. Meyer (1940) 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278.)

As the United States Supreme Court noted in International Shoe, the minimum contacts test is not "mechanical or quantitative," but depends upon the "quality and nature" of the defendant's activities within the state. (International Shoe, supra, 326 U.S. at p. 319, 66 S.Ct. at p. 159.) If a nonresident corporation's activities are sufficiently wide-ranging, systematic, and continuous, it may be subject to jurisdiction within the state on a cause of action unrelated to those activities. (Id., at p. 318, 66 S.Ct. at p. 159; Secrest Machine Corp. v. Superior Court (1983) 33 Cal.3d 664, 669, 190 Cal.Rptr. 175, 660 P.2d 399; Buckeye Boiler Co. v. Superior Court (1969) 71 Cal.2d 893, 898-899, 80 Cal.Rptr. 113, 458 P.2d 57.) Where the activity is less extensive, the cause of action "must arise out of or be connected with the defendant's forum-related activity." (Buckeye Boiler, supra, 71 Cal.2d at p. 899, 80 Cal.Rptr. 113, 458 P.2d 57; see also Secrest, supra, 33 Cal.3d at p. 669, 190 Cal.Rptr. 175, 660 P.2d 399.)

Thus, in determining whether the defendant's contacts with the forum are sufficient to warrant jurisdiction, the courts must focus on "the relationship among the defendant, the forum, and the litigation." (Shaffer v. Heitner (1977) 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683; accord Secrest, supra, 33 Cal.3d at p. 668, 190 Cal.Rptr. 175, 660 P.2d 399.) "The relationship between the defendant and the forum must be such that it is 'reasonable ... to require the corporation to defend the particular suit which is brought there.' " (World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490, quoting International Shoe, supra, 326 U.S. at p. 317, 66 S.Ct. at p. 158, emphasis added.)

In the 40 years since International Shoe was decided, the minimum contacts standard has been "substantially relaxed." (World-Wide Volkswagen, supra, 444 U.S. at p. 292, 100 S.Ct. at p. 565.) In McGee v. International Life Ins. Co. (1957) 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223, the Supreme Court described the reason for liberalizing the rule. "In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more States and may involve parties separated by the full continent. With this increasing nationalization of commerce has come a great increase in the amount of business conducted by mail across state lines. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity." (Id., at pp. 222-223, 78 S.Ct. at p. 201.) Moreover, as the Supreme Court observed in Worldwide Volkswagen, "[t]he historical developments noted in McGee ... have only accelerated in the generation since that case was decided." (444 U.S. at p. 293, 100 S.Ct. at p. 565.)

However, liberalization of the minimum contacts rule has not proceeded unabated. Shortly after McGee was decided, the Supreme Court warned that the state court's jurisdiction over nonresidents is not limited solely by the inconvenience of litigating in a foreign tribunal. In addition to protecting defendants from the burdens of "distant litigation," the jurisdictional limits imposed by the due process clause "are a consequence of the territorial limitations on the power of the respective States." (Hanson v. Denckla (1958) 357 U.S. 235, 251, 78 S.Ct. 1228, 1238, 2 L.Ed.2d 1283.)

Therefore, even when a nonresident defendant would suffer only minor inconvenience as a result of the exercise of jurisdiction, "minimal contacts" with the forum are constitutionally required. (Ibid.) The Hanson court did not define the "minimal contacts" requirement except to hold that "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." (Id., at p. 253, 78 S.Ct. at p. 1240.)

More than 20 years after the Hanson decision, the Supreme Court applied the "purposefully avails" standard to an action for products liability. (See World-Wide Volkswagen, supra, 444 U.S. 286, 297-298, 100 S.Ct. 559, 567, 62 L.Ed.2d 490.) As in Hanson, the court in World-Wide Volkswagen stressed the limitations of the states' jurisdiction over nonresidents, citing principles of "interstate federalism." (Id., at pp. 293-294, 100 S.Ct. at p. 565.) Applying these principles, the court held the defendants' contacts with the forum insufficient to warrant jurisdiction. (Id., at p. 299, 100 S.Ct. at p. 568.)

Plaintiffs in World-Wide Volkswagen sued the manufacturer, importer, regional distributor, and retailer of their car for damages arising out of an automobile accident. The regional distributor (World-Wide) sold vehicles, parts, and accessories to dealers in New York, New Jersey, and Connecticut. The retailer (Seaway) sold cars only in New York, where plaintiffs purchased their car. Neither the distributor nor the retailer did any business in Oklahoma or shipped products to Oklahoma. (Id., at pp. 288-289, 100 S.Ct. at pp. 562-563.)

The accident occurred in Oklahoma as...