Preventing Liability in U.S. Courts by Limiting “Minimum Contacts” and Selling Exclusively Through a U.S.-Based Company

Abstract:

L’ingresso nel mercato statunitense presenta per le imprese dell’Unione Europea profili di rischio particolare con riferimento ad ipotesi di coinvolgimento in controversie giudiziarie per risarcimento danni da responsabilità da prodotto. In questa ipotesi, anche la semplice fornitura di un componente inserito in un bene complesso, commercializzato in quel mercato da una impresa terza, può indurre il giudice della corte statunitense a riconoscere la propria giurisdizione nei confronti dell’impresa dell’Unione Europea (nel caso che si presenta, italiana). La conoscenza degli orientamenti della giurisprudenza USA può fornire utili indicazioni alle imprese comunitarie per assumere alcune precauzioni, soprattutto nella fase che precede la fornitura (subfornitura) a favore dell’impresa che poi potrà effettuare la commercializzazione del bene.

We live in an exciting time of nearly unlimited opportunity for companies of all sizes throughout the world. A small company in Bologna has the potential to reach customers and business partners in markets of all sizes as far away as London, Tokyo, Mexico City, and Minneapolis. With such incredible opportunity comes some amount of risk. As you look to expand, the question you have to ask yourself is how much risk is my company willing to assume to do business internationally? With regards to liability in the United States, a recent court case coming out of Florida offers some lessons about how to limit the risk of liability. The case is B.C.S. S.r.L. v. Wise et al., 989 So. 2d 702 (Fla. App. 2008).

In this case, a United States citizen was injured in a boating accident off the coast of Florida and sued all of the manufacturers involved in the production of the boat, including an Italian company that made the made the steering system. The Italian company had no offices in the United States and was not authorized to do business in the United States. It was only able to enter the U.S. market by forming a partnership with a U.S. company. The U.S. company was based in Florida and purchased the steering system from the Italian company, integrated the system into its other products and then sold it throughout the United States.

In the law suit brought by the injured boater, the Italian company filed a motion to dismiss the case before the trial even started claiming that the U.S. court lacked jurisdiction over the foreign company. In the United States, to determine whether U.S. courts can exercise personal jurisdiction over a foreign defendant, the courts will apply the “stream of commerce test.”

This test inquires

(1) whether the foreign company placed the product into the stream of commerce,

(2) whether the foreign company knew or should have known the likely destination of the product, and

(3) whether the foreign company’s conduct and connections with the forum state are such that it may reasonably foresee being brought into court in that forum. The court ruled that, despite participating in conferences in Florida, the Italian company had not demonstrated enough “minimum contacts” in Florida’s market to allow the court to assert jurisdiction over the Italian company.

It may sound intuitive, but limiting contact with U.S. markets is crucial to limiting liability in the U.S. courts. From the standpoint of limiting liability in the United States, a company’s best option is to sell its products to another company, which in turn, has a presence in the U.S. market. Provided that the supplying company is not involved in the marketing and distribution, there is little chance that a court could exercise personal jurisdiction over it. While the benefits of limited liability are obvious and plenty, such limited liability may come at a cost such as potentially fewer profits, less opportunity to direct what happens with one’s product, and less control over the product’s marketing and distribution.

Working with an experienced attorney can do two things to significantly limiting potential liability in U.S. courts when entering into a sales agreement similar to the case above.

First, an attorney can utilize his or her experience and advise a company as to which business practices will or will not likely lead a court to impose liability on the foreign company.

Secondly, an attorney can draft agreements and contracts between the foreign and U.S. company in such a way as to make explicit the intention to limit liability for the foreign company. Entering into a sales agreement with a U.S. company with the advice of an attorney and having an attorney involved in the implementation of the agreement can allow companies of all sizes throughout the world to expand into the U.S. market while significantly limiting the potential liability in U.S. courts. Abstract:

L’ingresso nel mercato statunitense presenta per le imprese dell’Unione Europea profili di rischio particolare con riferimento ad ipotesi di coinvolgimento in controversie giudiziarie per risarcimento danni da responsabilità da prodotto. In questa ipotesi, anche la semplice fornitura di un componente inserito in un bene complesso, commercializzato in quel mercato da una impresa terza, può indurre il giudice della corte statunitense a riconoscere la propria giurisdizione nei confronti dell’impresa dell’Unione Europea (nel caso che si presenta, italiana). La conoscenza degli orientamenti della giurisprudenza USA può fornire utili indicazioni alle imprese comunitarie per assumere alcune precauzioni, soprattutto nella fase che precede la fornitura (subfornitura) a favore dell’impresa che poi potrà effettuare la commercializzazione del bene.

We live in an exciting time of nearly unlimited opportunity for companies of all sizes throughout the world. A small company in Bologna has the potential to reach customers and business partners in markets of all sizes as far away as London, Tokyo, Mexico City, and Minneapolis. With such incredible opportunity comes some amount of risk. As you look to expand, the question you have to ask yourself is how much risk is my company willing to assume to do business internationally? With regards to liability in the United States, a recent court case coming out of Florida offers some lessons about how to limit the risk of liability. The case is B.C.S. S.r.L. v. Wise et al., 989 So. 2d 702 (Fla. App. 2008).

In this case, a United States citizen was injured in a boating accident off the coast of Florida and sued all of the manufacturers involved in the production of the boat, including an Italian company that made the made the steering system. The Italian company had no offices in the United States and was not authorized to do business in the United States. It was only able to enter the U.S. market by forming a partnership with a U.S. company. The U.S. company was based in Florida and purchased the steering system from the Italian company, integrated the system into its other products and then sold it throughout the United States.

In the law suit brought by the injured boater, the Italian company filed a motion to dismiss the case before the trial even started claiming that the U.S. court lacked jurisdiction over the foreign company. In the United States, to determine whether U.S. courts can exercise personal jurisdiction over a foreign defendant, the courts will apply the “stream of commerce test.”

This test inquires

(1) whether the foreign company placed the product into the stream of commerce,

(2) whether the foreign company knew or should have known the likely destination of the product, and

(3) whether the foreign company’s conduct and connections with the forum state are such that it may reasonably foresee being brought into court in that forum. The court ruled that, despite participating in conferences in Florida, the Italian company had not demonstrated enough “minimum contacts” in Florida’s market to allow the court to assert jurisdiction over the Italian company.

It may sound intuitive, but limiting contact with U.S. markets is crucial to limiting liability in the U.S. courts. From the standpoint of limiting liability in the United States, a company’s best option is to sell its products to another company, which in turn, has a presence in the U.S. market. Provided that the supplying company is not involved in the marketing and distribution, there is little chance that a court could exercise personal jurisdiction over it. While the benefits of limited liability are obvious and plenty, such limited liability may come at a cost such as potentially fewer profits, less opportunity to direct what happens with one’s product, and less control over the product’s marketing and distribution.

Working with an experienced attorney can do two things to significantly limiting potential liability in U.S. courts when entering into a sales agreement similar to the case above.

First, an attorney can utilize his or her experience and advise a company as to which business practices will or will not likely lead a court to impose liability on the foreign company.

Secondly, an attorney can draft agreements and contracts between the foreign and U.S. company in such a way as to make explicit the intention to limit liability for the foreign company. Entering into a sales agreement with a U.S. company with the advice of an attorney and having an attorney involved in the implementation of the agreement can allow companies of all sizes throughout the world to expand into the U.S. market while significantly limiting the potential liability in U.S. courts.