Foreign Tire Manufacturer Subject To Personal Jurisdiction In Iowa

The Supreme Court of Iowa had to confront unsettled federal precedent to decide whether a Chinese tire manufacturer that sold thousands of tires in Iowa through an American distributor could be subject to personal jurisdiction in the state.  The tire at issue exploded as it was being inflated and caused severe injuries to the individual inflating it.  The individual’s family brought suit alleging that the tire was defectively designed and was unreasonably dangerous given it was prone to explode during inflation.  The Chinese manufacturer has no employees or offices in the United States and does not advertise in this country.  It delivered the tires F.O.B. to a port in China.  The U.S. distributor that ordered the tires selected the destinations for each shipment and paid the shipping costs.

The lower court concluded that the court could not exercise personal jurisdiction over the Chinese manufacturer.  The court found that the tire in question had been shipped from China to Tennessee and that no tire of this type had been shipped from China directly to Iowa (tires of a different model had been).  Iowa’s high court reversed.  Since the U.S. Supreme Court’s sharply divided decision in J. McIntyre Machinery, Ltd. v. Nicastro (2011), the application of the “stream of commerce” test for personal jurisdiction in products liability, personal injury cases has been a quasi confusing area of the law.  Iowa’s high court held that the Federal Constitution permits the exercise of personal jurisdiction over a high-volume, foreign manufacturer whose allegedly dangerous product purchased in Iowa injured a resident of Iowa.

In finding the exercise of personal jurisdiction appropriate, the court emphasized the regular course of sales by the foreign manufacturer into Iowa and the fact that the manufacturer shipped thousands of tires (albeit not the accident tire) into the state.  The court explained, “As we await further guidance from the fractured United States Supreme Court, we do not foreclose the possibility of revisiting the stream-of-commerce test for small nonresident sellers.  We recognize such defendants may avoid personal jurisdiction when fairness and substantial justice dictate that outcome.”  The manufacturer in this case, however, manufactured 3.1 million tires in the year of the incident, and sold hundreds of thousands of them for distribution in the United States.


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