The expansion of state jurisdiction over out-of- state companies has taken another hit, this time by the Appellate Division of the State of New Jersey (See also, Client Advisories on the Supreme Court’s decisions in McIntyre and Goodyear).
In Mische v. Bracey’s Supermarket, ___ N.J. Super. __ (App. Div. 2011), the Appellate Division stated the issue to be decided:
Whether an out-of-state business entity’s membership in and purchase of goods and services from a New Jersey-based retailer’s cooperative provides a sufficient foundation for the New Jersey courts to exercise long-arm jurisdiction over a claim against that business entity that is unrelated to its agreement with the retailer’s cooperative.
The court concluded “that New Jersey’s exercise of jurisdiction over such a claim would violate the Due Process Clause of the Fourteenth Amendment.”
On July 16, 2007, the plaintiff was involved in a slip-and-fall accident in the defendant’s supermarket in Pennsylvania. The defendant also operated two other supermarkets in Pennsylvania. At the time of the accident, the plaintiff lived in Pennsylvania but later moved to New Jersey. Nearly two years after the accident she filed her personal injury lawsuit in Passaic County, New Jersey.
Following discovery, the defendant moved to dismiss on the ground that New Jersey courts did not have jurisdiction over the plaintiff’s claim. In its motion, the defendant noted that it was a Pennsylvania corporation that did not do business in New Jersey, did not own or control property in New Jersey, did not have any agents in New Jersey, and did not advertise in New Jersey.
In opposition, the plaintiff argued that the defendant held itself out to the public as part of the “Shop Rite” chain, which had stores in New Jersey. The plaintiff also stressed that the defendant purchased 85 percent of its products, as well as certain services, from a retailers’ cooperative that was based in Elizabeth, New Jersey, of which it was a member.
The Appellate Division relied on the well-established principles concerning the exercise of jurisdiction and the differences between specific jurisdiction (when a cause of action arises directly from a defendant’s contacts with the forum state) and general jurisdiction (when a cause of action is not related to the defendant’s contacts with the forum state). Because the plaintiff’s accident in the defendant’s Pennsylvania store was not related to the defendant’s contacts with New Jersey, the plaintiff had to show that the New Jersey courts had general jurisdiction. This requires proof of extensive contacts between the defendant and the forum.
After setting out the defendant’s lack of contacts with New Jersey, its sole contact with the State was its purchase of products and services from the New Jersey-based cooperative, the court held:
This form of contact is insufficient to support the exercise of general jurisdiction over defendant by the New Jersey courts… it is well established that ownership of an entity conducting business in New Jersey is an insufficient basis for the assertion of jurisdiction over the out-of-state company.
The court also ruled that the defendant’s membership in the New Jersey-based cooperative was “an insufficient predicate for the exercise by the New Jersey courts of long-arm jurisdiction over a claim that has no relation to that membership.” The plaintiff’s accident was completely unrelated to the defendant’s purchases from the New Jersey-based group, and the plaintiff went shopping at the defendant’s store because she lived in Pennsylvania, not because the defendant belonged to the New Jersey-based cooperative. Accordingly, the court held that New Jersey’s courts could not exercise jurisdiction over the defendant.
While this case involves a suit for personal injury not relevant to the jurisdictional issues unrelated to our Firm’s areas of practice, it does show that the efforts to expand state jurisdiction are not without limitations.
Clients and others with questions about long-arm statutes and jurisdiction may contact Charles H. Helein of the Firm 703-714-1301, email@example.com.