Showa Denko K.K. v. Pangle, A91A1435

• Decision Date: 27 November 1991
• Docket Number: No. A91A1435,A91A1435
• Citation: 414 S.E.2d 658,202 Ga.App. 245
• Parties: , Prod.Liab.Rep. (CCH) P 13,093 SHOWA DENKO K.K. v. PANGLE et al.
• Court: Georgia Court of Appeals

Page 658

414 S.E.2d 658

202 Ga.App. 245, Prod.Liab.Rep. (CCH) P 13,093

SHOWA DENKO K.K. v. PANGLE et al.

No. A91A1435.

Court of Appeals of Georgia.

Nov. 27, 1991.

Reconsideration Denied Dec. 11, 1991.

Certiorari Denied Feb. 10, 1992.

Troutman, Sanders, Lockerman & Ashmore, N. Karen Deming, Richard W. Morrell, Atlanta, for appellant.

Mitchell, Coppedge, Wester, Bisson & Miller, Warren N. Coppedge, Jr., Joseph T. Leman, Dalton, for appellees.

POPE, Judge.

Plaintiff Juanita Louise Pangle is a Georgia resident whose health was severely impaired in late 1989 when she contracted eosinophilia myalgia syndrome as a result of ingesting L-tryptophan, an amino acid used as a non-prescription food supplement. She and her husband filed a product liability suit in Catoosa County against the pharmacy from which she purchased the L-tryptophan; Nature's Bounty, Inc., and the Hudson Corporation, the manufacturers which produced and marketed the tablets of L-tryptophan which she consumed; Showa Denko K.K. ("Showa Denko"), the Japanese company which allegedly produced the raw material used by the manufacturers of the tablets; and Showa Denko America, Inc. ("S.D.A."), the New York subsidiary of Showa Denko which marketed and distributed the raw material to American pharmaceutical manufacturers. Showa Denko appeals the denial of its motion to dismiss on the ground that personal jurisdiction is lacking both under the Georgia Long-Arm Statute and pursuant to constitutional requirements of due process.

1. The Georgia Long-Arm Statute requires "that an out-of-state defendant must do certain acts within the State of Georgia before he can be subjected to personal jurisdiction." Gust v. Flint, 257 Ga. 129, 130, 356 S.E.2d 513 (1987). Moreover, the cause of action must "arise from" one of the acts set forth in the statute. OCGA § 9-10-91. Plaintiffs allege Showa Denko is subject to jurisdiction pursuant to either subsection (1) or (3) of the statute which provides: "A court of this state may exercise personal jurisdiction over any non-resident ... as to a cause of action arising from any of the acts [or] omissions ... enumerated in this Code section, in the same manner as if he were a resident of the state, if in person or through an agent, he: (1) Transacts any business within this state; ... [or] (3) Commits a tortious injury in this state caused by an act or omission outside this state if the tort-feasor regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state...." The record reflects that S.D.A. acts as Showa Denko's agent for distributing and marketing L-tryptophan and other products in the United States. ¹ Thus, pursuant to the Georgia Long-Arm Statute, if S.D.A. is subject to jurisdiction because of an act it performed on behalf of Showa Denko, then it follows that Showa Denko would also be subject to jurisdiction. (We note that S.D.A. has filed no motion to dismiss.)

The first question is whether Showa Denko is subject to jurisdiction because the cause of action arises out of business it transacts in this state, as set forth in subsection (1) of the Long-Arm Statute. The record shows numerous visits to Georgia by Showa Denko employees to attend trade shows or otherwise to conduct business negotiations during the year before plaintiffs' injuries. It cannot be said, however, that plaintiffs' cause of action arises from any of these contacts with Georgia. Showa Denko operates a highly diversified business and manufactures and sells many different products. Most of the contacts Showa Denko made with Georgia relate to the marketing of its other products. Thus, Showa Denko is not subject to jurisdiction pursuant to subsection (1) of the Long-Arm Statute because of the unrelated business it transacts in the state.

Showa Denko did, however, contract with the University of Georgia to test feed-grade L-tryptophan on laying hens. The record contains no evidence concerning how feed-grade L-tryptophan differs, if at all, from the product produced for human consumption because Showa Denko objected to such interrogatories on the ground they were not related to the issue of jurisdiction. Even if feed-grade L-tryptophan is substantially similar to L-tryptophan produced for human consumption, however, plaintiffs' cause of action does not arise out of the marketing or testing of feed-grade L-tryptophan for animals. Thus, the act of entering into the contract for animal feed research would not confer jurisdiction in this case because plaintiffs' injuries did not arise out of this act.

The second question is whether Showa Denko is subject to jurisdiction because the cause of action arises out of any act described in subsection (3) of the Long-Arm Statute. The record contains no evidence that Showa Denko directly committed any act in Georgia RElated to L-tryptophan for human consumption. Its agent, S.D.A., however, sold L-tryptophan in bulk form to twenty-three customers in nine states for use in the manufacture of dietary supplements. Although none of the manufacturers is located in Georgia, S.D.A. sold to manufacturer customers in the neighboring states of Florida and South Carolina. The customers included nationally marketed brands such as Nature's Bounty as well as General Nutrition Products, Inc., and Walgreen Laboratories, Inc., which operate retail stores throughout the country. S.D.A. sold approximately $4,000,000 worth of L-tryptophan in the United States during 1989. As a result, L-tryptophan produced by Showa Denko was placed in the stream of commerce in virtually all 50 states. In our opinion, this systematic and purposeful activity establishes that Showa Denko, through its agent S.D.A., "engages in [a] persistent course of conduct, or derives substantial revenue from goods used or consumed ... in this state." OCGA § 9-10-91(3). The sale of goods in another state, knowing that they will be resold in Georgia, is a purposeful activity sufficient to establish a "contact" with Georgia. See Shellenberger v. Tanner, 138 Ga.App. 399, 412, 227 S.E.2d 266 (1976) (in which this court held a foreign corporation had "causal responsibility" for the presence of an allegedly defective aircraft in this state because it sold the aircraft in another state to a Georgia corporation knowing it would be resold to a Georgia resident). Thus, pursuant to OCGA § 9-10-91(3) jurisdiction may be exercised as to plaintiffs' cause of action alleging a tortious injury in this state caused by Showa Denko's alleged negligence in manufacturing the L-tryptophan outside the state.

2. The remaining question is whether such an exercise of jurisdiction is consistent with the requirements of due process. Due process requires that the non-resident defendant "have certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' Milliken v. Meyer, 311 U.S. 457, 463 [61 S.Ct. 339, 343, 85 L.Ed. 278 (1940) ]." International Shoe Co. v. State of Wash., 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). According to International Shoe, the critical test is not the mere volume of activity in the forum state but "the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure." Id. at 319, 66 S.Ct. at 160. Thus, it is not unfair to require a corporation to respond to a suit in a state from which it derives the benefits and privileges of conducting business. Can it be said that Showa Denko conducts business in this state by introducing into the stream of commerce, particularly in two neighboring states, a product which it knows will be sold in Georgia?

Whether the introduction of a product into the stream of commerce establishes minimum contacts with a state in which the product is ultimately sold depends on the foreseeability that the product would be sold there. "[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). In World-Wide Volkswagen, the United States Supreme Court held that Oklahoma did not have personal jurisdiction over an automobile dealership and a regional automobile distributor, both located in New York, simply because it was foreseeable that the automobile sold to plaintiffs in New York could be transported to Oklahoma and involved in an accident there. The Court went on to state, however: "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 297-298, 100 S.Ct. at 567. Unlike the facts in World-Wide Volkswagen, in which the plaintiff unilaterally used defendant's product in the forum State, in the case now before us it is not happenstance that the product was ultimately consumed in Georgia. Instead, plaintiff's purchase and use of defendant's product in Georgia was a result of defendant's deliberate and purposeful nationwide distribution of its product. When, as here, a foreign manufacturer sells its product to a United States distributor knowing that its product will be sold in every state, it should reasonably expect to be haled into court in Georgia for an injury caused in this state by that product. See Burton v. Subaru of America,...