ASAHI METAL INDUSTRY CO LTD v. CHENG SHIN RUBBER INDUSTRIAL CO LTD

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Court of Appeal, First District, Division 5, California.

ASAHI METAL INDUSTRY CO., LTD., Petitioner, v. The SUPERIOR COURT OF SOLANO COUNTY, Respondent, CHENG SHIN RUBBER INDUSTRIAL CO., LTD., Real Party in Interest.

A022366.

Decided: September 15, 1983

Richard D. Hoffman, David W. Condeff, Lillick, McHose & Charles, San Francisco, for petitioner. No appearance for respondent. Ronald R. Haven, Kenneth B. Shepard, Shepard & Haven, Sacramento, for real party in interest.

Asahi Metal Industry Co., Ltd., a Japanese corporation, seeks by petition for writ of mandate to compel respondent superior court to quash service upon it of summons on a cross-complaint in a California product liability action.   We grant the writ because, on the record before us, Asahi has insufficient contacts with California to subject it to respondent court's jurisdiction.

Asahi manufactures tire valve assemblies in Japan and sells the assemblies to several different tire manufacturers for use as components in finished tires.   One such manufacturer is Cheng Shin Rubber Industrial Co., Ltd., in Taiwan.   In September 1978, Gary Zurcher was injured and his wife was killed when a tire on their motorcycle blew out as they were driving on a freeway in Solano County.   The tire's tube had been manufactured by Cheng Shin and incorporated an Asahi valve assembly.   Zurcher and his children brought this action, attributing the accident to Cheng Shin among others.   Asahi is not named as a defendant.   More than two years after the action was commenced, Cheng Shin filed a cross-complaint for indemnity (cf. American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899) against the other defendants and several new cross-defendants including Asahi.   Summons on the cross-complaint was served on Asahi, which moved to quash the service.   Asahi's motion was denied and this writ petition followed.

Service on Asahi was effected in Japan under applicable treaty and is not challenged.   Asahi contends that it is not subject to the jurisdiction of the California court and that “[i]t would be extremely inconvenient and burdensome for ASAHI to enter into this litigation in California for a claim unrelated to any conduct of ASAHI outside of JAPAN.”

The relevant rules were recently summarized by the Supreme Court in Secrest Machine Corp. v. Superior Court (1983) 33 Cal.3d 664, 668–670, 190 Cal.Rptr. 175, 660 P.2d 399.   There is no need either to reprint or to paraphrase that summary.   In this rapidly shrinking commercial world with business activities becoming increasingly integrated and interdependent, it is possible for a foreign manufacturer of a component embodied elsewhere into another foreign manufacturer's finished product, by reason of deliberate or foreseeable indirect activity to be found subject to California jurisdiction for claims based on asserted defects in the component.  (Cf. Buckeye Boiler Co. v. Superior Court (1969) 71 Cal.2d 893, 903, 80 Cal.Rptr. 113, 458 P.2d 57;  St. Joe Paper Co. v. Superior Court (1981) 120 Cal.App.3d 991, 175 Cal.Rptr. 94.)   But under the case law as synthesized in Secrest, the dispositive question here is whether the quality and nature of Asahi's contacts with California are such that it would be reasonable in all the circumstances to require Asahi to come to California to respond to Cheng Shin's cross-complaint.

According to Asahi's president “Asahi has from time to time in the last ten years sold tire valves for use on motorcycle tire tubes to Cheng Shin ․ in Taiwan.   All of the sales occurred in Taiwan.   All of the shipments were sent from JAPAN to TAIWAN.   None of the shipments were made to California.”   Cheng Shin bought and incorporated 150,000 Asahi valve assemblies in 1978;  500,000 in 1979;  500,000 in 1980;  100,000 in 1981;  and 100,000 in 1982.   Sales to Cheng Shin accounted for 1.24 percent of Asahi's gross in 1981 and 0.44 percent in 1982.   Cheng Shin purchases valve assemblies from suppliers other than Asahi as well, and sells finished tubes throughout the world;  it alleges that approximately 20 percent of its sales in the United States are in California.   It markets its tubes in California through Cheng Shin Tire USA, Inc., a California corporation, which apparently is not involved in this lawsuit.

The record contains an unscientific sampling of the inventory of a cyclery in Solano County, conducted earlier this year, which indicates that of approximately 117 tubes on hand, 97 had been manufactured in Japan or Taiwan, that of the 97, Cheng Shin had manufactured 53 (somewhat more than half), and that Asahi had provided the valve stem assemblies for slightly less than one-fourth of the Cheng Shin tubes (and for approximately the same percentage of the other Japanese and Taiwanese tubes).

According to Asahi's president “ASAHI does not do business in California.   It has no office in California.   It has no agents in California.   It has no employees in California.”   It maintains no spare parts and gives no advice on maintenance, sales, or use in California.   It does not advertise in California.   It does not solicit business in California.   It has conducted no deliberate economic acts to serve the tire market in California.   It owns no property in California.   Further, the president declares that “ASAHI has never contemplated that its limited sales of tire valves to Cheng Shin in Taiwan would subject it to lawsuits in California.”

A Cheng Shin manager, on the other hand, declares that “[i]n discussions with ASAHI regarding the purchase of valve stem assemblies the fact that my Company sells tubes throughout the world and specifically the United States has been discussed.   I am informed and believe that ASAHI was fully aware that valve stem assemblies sold to my Company and to others would end up throughout the United States and in California.”

Asahi had only such contact with California as is implicit in the fact that it sold components to another nonresident manufacturer which foreseeably would sell the finished product in California.   By selling valve stem assemblies to Cheng Shin in these circumstances, was Asahi “ ‘engaging in economic activity within this state “as a matter of commercial actuality” ’ ” within the meaning of Secrest Machine Corp. v. Superior Court, supra, 33 Cal.3d at p. 669, 190 Cal.Rptr. 175, 660 P.2d 399 and Buckeye Boiler Co. v. Superior Court, supra, 71 Cal.2d 893, 902–903, 80 Cal.Rptr. 113, 458 P.2d 57?   Could Asahi thus be said purposefully to have availed itself “of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws” within the meaning of Hanson v. Denckla (1958) 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 and cognate cases?

Strongest support for affirmative answers, in these circumstances, would come from what has been called the “stream-of-commerce” theory of jurisdiction over nonresident manufacturers.   This theory, usually attributed to Gray v. American Radiator & Standard Sanitary Corp. (1961) 22 Ill.2d 432, 176 N.E.2d 761, was authoritatively validated in World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490:  “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.”  (444 U.S. at pp. 297–298, 100 S.Ct. at p. 567.)   One federal court has explained the theory as follows:  “The stream-of-commerce theory developed as a means of sustaining jurisdiction in products liability cases in which the product had traveled through an extensive chain of distribution before reaching the ultimate consumer.   Under this theory, a manufacturer may be held amenable to process in a forum in which its products are sold, even if the products were sold indirectly through importers or distributors with independent sales and marketing schemes.   Courts have found the assumption of jurisdiction in these cases to be consistent with the due process requirements identified above:  by increasing the distribution of its products through indirect sales within the forum, a manufacturer benefits legally from the protection provided by the laws of the forum state for its products, as well as economically from indirect sales to forum residents.   Underlying the assumption of jurisdiction in these cases is the belief that the fairness requirements of due process do not extend so far as to permit a manufacturer to insulate itself from the reach of the forum state's long-arm rule by using an intermediary or by professing ignorance of the ultimate destination of its products.”  (DeJames v. Magnificence Carriers, Inc. (3d Cir.1981) 654 F.2d 280, 285.)

But World-Wide Volkswagen also points out that mere foreseeability that the product will enter the forum state will not be enough by itself to establish jurisdiction over the distributor and retailer:  “ ‘[F]oreseeability’ alone has never been a sufficient benchmark for personal jurisdiction under the Due Process Clause․  [¶]  If foreseeability were the criterion ․ [e]very seller of chattels would in effect appoint the chattel his agent for service of process.   His amenability to suit would travel with the chattel.”  (444 U.S. at pp. 295–296, 100 S.Ct. at p. 566.)   To reconcile World-Wide Volkswagen's endorsement of the stream-of-commerce theory with its views on foreseeability, we conclude that “expectation” that the product will be purchased in the forum state means something more than mere foreseeability that the product will be so purchased.  World-Wide Volkswagen acknowledges that foreseeability is not “․ wholly irrelevant.   But the 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.”  (444 U.S. at p. 297, 100 S.Ct. at p. 567.)

These are elastic terms consistent with the California Supreme Court's caution in Secrest that there is no bright line to be drawn between cases in which there are sufficient contacts between the forum and the foreign defendant and those in which there are not.  World-Wide Volkswagen points out that “[t]he concept of minimum contacts ․ can be seen to perform two related, but distinguishable, functions.   It protects the defendant against the burdens of litigating in a distant or inconvenient forum.   And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.”  (444 U.S. at pp. 291–292, 100 S.Ct. at pp. 563–564.)  World-Wide Volkswagen's second point is applicable a fortiori where it is proposed that a state's sovereignty be extended beyond the federal system.   Implicit in each of the two functions World-Wide Volkswagen identifies is a balancing of interests among the litigants and the forum.

In the circumstances here, we conclude that it would not be reasonable to require Asahi to respond in California solely on the basis of ultimately realized foreseeability that the product into which its component was embodied would be sold all over the world including California.

Furthermore, we conclude that it would not be fair and reasonable for a California court to exercise jurisdiction.   It is not reasonable to require a component manufacturer, a small part of whose trade is with a Taiwanese fabricator, to come to California to respond to this cross-complaint.

Let a peremptory writ of mandate issue commanding respondent superior court to vacate its order denying the motion of Asahi Metal Industry Co., Ltd., to quash service of summons, and to enter an order granting the motion.

LOW, Presiding Justice.

KING and HANING, JJ., concur.