Rostad v. On-Deck, Inc.

• Decision Date: 16 August 1985
• Docket Number: ON-DEC,No. C2-84-235,INC,C2-84-235
• Citation: 372 N.W.2d 717
• Parties: Prod.Liab.Rep.(CCH)P. 10,750 Dean A. and Barbara J. ROSTAD, Respondents, v., petitioner, Appellant, Gary Guy Willey, Respondent, Sportcraft Company, Respondent.
• Court: Minnesota Supreme Court

Page 717

372 N.W.2d 717

Prod.Liab.Rep.(CCH)P. 10,750

Dean A. and Barbara J. ROSTAD, Respondents, v. ON-DECK, INC., petitioner, Appellant, Gary Guy Willey, Respondent, Sportcraft Company, Respondent.

No. C2-84-235.

Supreme Court of Minnesota.

Aug. 16, 1985.

Syllabus by the Court

A manufacturer who places a product in the stream of commerce with the expectation that the product will be used in another state is subject to the jurisdiction of that state's courts.

Jardine, Logan & O'Brien, Graham Heikes, Brian N. Johnson, St. Paul, for appellant.

Robbins, Zelle, Larson & Kaplan, Leo F. Feeny, Susan R. Nelson, St. Paul, for Rostad.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, Kenneth W. Dodge, Minneapolis, for Willey.

Lasley, Gaughan, Stick & Angell, P.A., Steven J. Muth, Minneapolis, for Sportcraft.

Heard, considered, and decided by the court en banc.

YETKA, Justice.

While umpiring a softball game in the Twin Cities, Dean Rostad was hit in the head by a metal ring used as a bat weight that flew from the end of the bat of the batter who was warming up on deck. Rostad sued the manufacturer of the bat weight, On-Deck, Inc., in Hennepin County District Court. On-Deck moved that the case be dismissed for lack of personal jurisdiction. The trial court granted the motion and ordered entry of the judgment in On-Deck's favor. The judgment was entered on January 9, 1984. Rostad appealed to the Minnesota Court of Appeals on February 6, 1984. The court of appeals, 354 N.W.2d 95, reversed the trial court. On-Deck petitioned this court for further review; the petition was granted. We affirm the court of appeals.

On-Deck, Inc., is a New Jersey corporation formed to manufacture a solid metal, vinyl covered weight. It is shaped like a donut so that it slips over the handle of a baseball bat, slides down and, ideally, lodges itself on the bat's barrel. A batter warming up will slip the weight on and swing the bat as hard as possible. If the bat's barrel is small enough, however, the weight can slip off the end and fly through the air. Just such an event happened in this case. A bat weight slipped off the end of a batter's bat and hit Dean Rostad, who was umpiring, in the head. The blow severely injured Rostad, who, after extensive hospitalization, still suffers mental, motor, and verbal difficulties.

Although having no offices in Minnesota, owning no property in Minnesota, having no agent appointed in Minnesota, and not being licensed to do business in Minnesota, On-Deck has sold a great number of its bat weights here through distributors. From 1968, when the weight first went on the market, until 1973, On-Deck contracted with General Sportcraft to be the bat weight's exclusive distributor for the "continent of North America, the state of Hawaii, and all islands in the Caribbean Sea and the Gulf of Mexico." After 1973, On-Deck sold weights directly to national distributors such as Sears, K-Mart, and Hillerich & Bradsby Co.

On-Deck retained the right to sell and market to major league baseball teams. It required that its "On-Deck" trademark be prominently displayed on all packages of the bat weight. A picture of Elston Howard, former Yankee great and president of On-Deck, Inc., was prominently displayed on each package. Elston Howard and Frank Hamilton, the weight's inventor and owner of On-Deck, Inc., traveled the country extensively marketing the weight. Professional baseball teams were specifically targeted for marketing, presumably for the national exposure and stature that their use of the weight would provide.

The plaintiffs presented a number of sales receipts for purchases of bat weights from Minnesota sporting goods shops and departments. Affidavits from owners of sporting goods stores documented that the weights have been a popular product in Minnesota for a number of years. The Minnesota Twins have been buying the weights for at least 10 years. Nonetheless, Frank Hamilton has stated he never knew his bat weight was ever sold in Minnesota.

The bat weight that struck Rostad was found by Gary Willey at a ballfield in St. Louis Park where he worked as a groundskeeper. Willey brought the bat weight to softball games, including the game where Rostad was injured. There is no evidence as to how this particular bat weight found its way to Minnesota. For the purposes of this appeal only, On-Deck assumes that it manufactured the weight.

The issue in this case is whether Minnesota can exercise jurisdiction over a foreign corporation which sells products in Minnesota through distributors under a "stream of commerce" theory and when the plaintiffs cannot show how the particular product arrived in the state.

The plaintiffs seek personal jurisdiction over On-Deck, Inc., a New Jersey corporation, by Minnesota's long-arm statute. It allows jurisdiction over a defendant if that defendant "[c]ommits any act outside Minnesota causing injury or property damage in Minnesota." Minn.Stat. Sec. 543.19, subd. 1(d) (1984). Since we have determined that the legislature intended the statute to have the maximum extraterritorial effect allowed under the due process clause of the federal constitution, the permissibility of an attempted exercise of jurisdiction may be tested by analyzing whether it meets constitutional muster. Vikse v. Flaby, 316 N.W.2d 276, 281 (Minn.1980); Note, Due Process and Long-Arm Jurisdiction in Minnesota, 5 Wm. Mitchell L.Rev. 287, 314-16 (1979).

Due process requires that a defendant have minimum contacts with a jurisdiction before being required to defend against a lawsuit in that jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Requiring minimum contacts both protects a defendant from burdensome litigation in a far-flung jurisdiction and vindicates the status of states as co-equal sovereigns within the federal system. World-Wide Volkswagen v. Woodson, 444 U.S. 286, 291-92, 100 S.Ct. 559, 564-65, 62 L.Ed.2d 490 (1980). To have minimum contacts, the defendant must have purposefully availed itself of the privilege of conducting activities within the jurisdiction. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958). In Minnesota, a five-factor test first enunciated in the Eighth Circuit case of Aftanase v. Economy Baler Co., 343 F.2d 187, 197 (8th Cir.1965), is used to determine if minimum contacts exist. It requires the court to evaluate:

(1) The quantity of contacts with the forum state,

(2) The nature and quality of contacts,

(3) The source and connection of the cause of action with these contacts (4) The interest of the state providing a forum,

(5) The convenience of the parties.

Vikse v. Flaby, 316 N.W.2d at 282. The first three factors are the most important, the last two of lesser importance. Dent-Air, Inc. v. Beech Mountain Air Service, Inc., 332 N.W.2d 904, 907 (Minn.1983).

1. The Quantity of the Contacts

Despite having sold thousands of its bat weights here, On-Deck claims it has no contacts with Minnesota. On-Deck points out that it has never had an office, sales outlet, place of business, or agent for service of process here. It claims it has never had a direct contact with Minnesota. This may be true, but it fails to account for On-Deck's numerous indirect contacts with Minnesota.

On-Deck ignores its indirect contacts with Minnesota because it believes that, after the United States Supreme Court's decision in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), "purposeful contacts" must be direct contacts. Placing a product in the stream of commerce that leads to a state does not subject a manufacturer to jurisdiction, according to On-Deck, because such contacts are indirect rather than direct. On-Deck's frontal assault on the stream-of-commerce theory of jurisdiction misconstrues World-Wide Volkswagen, ignores the Supreme Court's express recognition of the theory, forgets scholarly comment on the subject, and fails to account for the plethora of cases upholding jurisdiction under a stream-of-commerce theory.

The World-Wide Volkswagen case dealt with a regional distributor and a retail dealer of cars at the end of the distribution chain who were being hailed into court in a jurisdiction far from their areas of distribution simply because the plaintiff had driven the car to that jurisdiction. Id. at 289, 100 S.Ct. at 563. Jurisdiction over the automobile's manufacturer and importer was assumed, though not at issue. Id. at 317-18, 100 S.Ct. at 570-71 (Blackmun, J., dissenting). Regional distributors and retail dealers cannot, according to the Supreme Court, be forced to defend lawsuits in jurisdictions far from their area of business just because a plaintiff brought the product to the jurisdiction. Id. at 298, 100 S.Ct. at 567.

Far different, however, is the situation of a manufacturer or a primary distributor:

Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others. 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.

Id. at 297-98, 100 S.Ct. at 567. (emphasis added). To hold otherwise would be to "doom all products liability cases to dismissal from forums other than the place of manufacture or initial sale." Jay, "Minimum Contacts" as a Unified Theory of Personal Jurisdiction: A Reappraisal, 59 N.C.L.Rev. 429, 442-43 (1981); see also Comment, Federalism, Due...