This opinion will
be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
McHale Engineering Limited,
Vermeer Manufacturing Company,
June 28, 2005
File No. C5-02-1162
H. Morrison Kershner, Pemberton, Sorlie, Rufer &
Kershner, P.L.L.P., 110 North Mill Street, P.O. Box 866, Fergus Falls, MN
Kevin S. Carpenter, Carpenter Injury Law Office, 204 Midsota
Center, 3701 North 12th Street
North, St. Cloud, MN 56303
(for respondent Steven Woller)
Robert D. Brownson, Kristi K. Warner, Brownson & Ballou,
PLLP, 225 South Sixth Street, Suite 4800, Minneapolis, MN 55402 (for appellant)
George W. Soule, David N. Lutz, Kristine T. Donatelle,
Bowman and Brooke LLP, 150 South Fifth Street, Suite 2600, Minneapolis, MN
55402 (for respondent Vermeer Mfg.)
and decided by Lansing,
Presiding Judge; Stoneburner,
Judge; and Minge,
U N P U B L I S H E D O P I N I O N
challenges the district court’s denial of its motion to dismiss the complaint for
lack of personal jurisdiction. Because
appellant has sufficient minimum contacts with Minnesota to support the exercise of
personal jurisdiction, we affirm.
On June 11, 2000,
respondent Steven Woller was injured while operating a bale wrapper on his farm
in Minnesota. This machine wraps large bales of hay with
plastic. In addition to farming, Woller
sells agricultural equipment. Respondent
Vermeer Manufacturing Company (Vermeer) supplied Woller with the bale wrapper
and encouraged Woller to use it on his farm as part of a special
promotion. The bale wrapper that injured
Woller was identified as a Vermeer SW-3500, but was manufactured by appellant,
McHale Engineering Limited (McHale).
is an Iowa
corporation, which primarily designs and manufactures a variety of tree and
agricultural equipment. Vermeer products
are distributed through a network of 474 independent, authorized dealers in 44
states throughout the United
Although the highest concentrations of Vermeer dealers are in Nebraska, Missouri, and Arkansas; Vermeer has 19 dealers in Minnesota.
manufactures agricultural equipment.
McHale is incorporated and has its principal place of business in Ireland. In 1997, Vermeer and McHale entered into a
Supply and Licensing Agreement (Agreement), under which McHale would
manufacture certain equipment and Vermeer would sell those items under its
name. McHale relied on its original
design and Vermeer then performed a safety review and requested seven to eight
changes. These changes were not to the
design, but rather involved location of the safety stickers and painting the machines
in Vermeer colors. According to the Agreement
McHale maintained ultimate approval of these changes. Pursuant to the Agreement, McHale supplied
Vermeer with operator and parts manuals, which Vermeer relied on in preparing owner
manuals that it distributed with the equipment, including the Vermeer SW-3500. Nothing identified the equipment as having
been designed or manufactured by McHale.
The manuals listed Vermeer as the only company to call for questions and
did not directly market or sell any of the Vermeer labeled equipment. However, in 1997 the director of McHale
attended a sales meeting in Iowa of Vermeer dealers from throughout the United States. The director also initiated a meeting in
which the director discussed Vermeer’s sales volumes of McHale equipment
throughout the United States. To promote sales, McHale rewarded two Vermeer
territory managers with the most sales and the largest increase of sales with
paid trips to Ireland. McHale did not advertise or solicit any
business in Minnesota
and had no connection with the bale wrappers once they were shipped to
Vermeer. Since the 1997 Agreement,
Vermeer has sold 840 pieces of McHale manufactured equipment in the United States and 41 in Minnesota.
Twenty-three bale wrappers, including 16 Vermeer SW-3500 bale wrappers, have
been sold in Minnesota.
According to the
Agreement, “McHale warrants that Products supplied and manufactured by McHale
hereunder shall be free of defects and workmanship for a period of twelve (12)
months from the date of delivery to the retail customers.” The Agreement also provides that
With respect to Products manufactured
by McHALE and sold to VERMEER, McHALE agrees to defend, protect, indemnify and
hold harmless VERMEER . . . against any and all claims, including expenses and
reasonable attorney fees, for injuries or damages of any kind . . . including,
but not limited to, claims in the nature of strict liability in tort,
negligence, or breach of express or implied warranty, resulting or allegedly
resulting from design, defects in material, workmanship or manufacturing,
failure to instruct, or failure to warn, up to product liability insurance
policy limits . . . . If product
liability insurance does not provide coverage for such occurrence, VERMEER
shall have no recourse against McHALE.
Woller filed suit
against Vermeer in April 3, 2002, alleging that his injury was the result of
defective design and/or inadequate warnings.
He amended his complaint to add McHale as a co-defendant. McHale moved to dismiss the action against it
on the ground that it was not subject to the jurisdiction of the courts of this
state. The district court denied
McHale’s motion. This appeal followed.
D E C I S I O N
jurisdiction exists is a question of law, which is reviewed de novo on
appeal. TRWL Fin. Establishment v. Select Int’l, Inc., 527 N.W.2d 573, 575
1995). Once personal jurisdiction is
challenged, the party asserting that personal jurisdiction exists has the
burden of proving a prima facie case supporting jurisdiction. Id. At the pretrial stage, the plaintiff's
alleged facts, including facts derived from the complaint and other supporting
documents, are taken as true. Dent-Air, Inc. v. Beech
Mountain Air Servs., Inc., 332
N.W.2d 904, 907 n. 1 (Minn.
According to Minnesota’s long-arm statute, Minnesota courts may exercise personal
jurisdiction over the defendant to the full extent of federal due process. Minn. Stat.
§ 543.19 (2004); Domtar, Inc. v.
Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn.
1995); Valspar Corp. v. Lukken Color
Corp., 495 N.W.2d 408, 410-11 (Minn.
1992). Due process requires that the
defendant have “certain minimum contacts” with the forum state and that the
court’s exercise of jurisdiction over the defendant in maintaining the suit
“does not offend traditional notions of fair play and substantial
justice.” Int’l Shoe Co. v. Wash., 326 U.S.
310, 316, 66 S. Ct. 154, 158 (1945) (quotation omitted).
Minnesota uses a five-factor test for
determining whether the exercise of jurisdiction over a defendant is consistent
with due process. Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565, 570 (Minn. 2004). The five factors include: “(1) the quantity
of contacts with the forum state; (2) the nature and quality of those contacts;
(3) the connection of the cause of action with these contacts; (4) the interest
of the state providing a forum; and (5) the convenience of the parties.” Id. (quoting Hardrives,
Inc. v. City of LaCrosee, Wis., 307 Minn.
290, 294, 240 N.W.2d 814, 817 (1976)).
“The first three factors determine whether minimum contacts exist and
the last two factors determine whether the exercise of jurisdiction is
reasonable according to traditional notions of fair play and substantial
justice.” Id. “[I]n doubtful cases, courts should lean
toward finding jurisdiction.” Nat’l City Bank of Minneapolis v. Ceresota
Mill Ltd. P’ship, 488 N.W.2d 248, 252 (Minn. 1992) (citation omitted).
A. Quantity of Contacts with Forum
argues that because it does not have any offices in Minnesota,
no McHale employees ever visited Minnesota, it
is not authorized to do business in Minnesota, it has no direct contacts with Minnesota, and only 41
of its products were sold in the state, the quantity of its contacts with this
state is insufficient to establish personal jurisdiction. However, minimum contacts may be indirect
under the stream-of-commerce theory. Juelich, 682 N.W.2d at 571; Rostad v. On-Deck, Inc., 372 N.W.2d 717,
1985). The stream-of-commerce theory was
developed by the Supreme Court in World-Wide
Volkswagen Corp. v. Woodson, where the Court stated:
When a corporation
“purposefully avails itself of the privilege of conducting activities within
the forum State,” (citation omitted) it has clear notice that it is subject to
suit there, and can act to alleviate the risk of burdensome litigation by
procuring insurance, passing the expected costs on to customers, or, if the
risks are too great, severing its connection with the State. Hence if the sale
of a product of a manufacturer or distributor such as Audi or Volkswagen is not
simply an isolated occurrence, but arises from the efforts of the manufacturer
or distributor to serve directly or indirectly, the market for its product in
other States, it is not unreasonable to subject it to suit in one of those
States if its allegedly defective merchandise has there been the source of
injury to its owner or to others. 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. 286, 297-98, 100 S. Ct. 559,
567 (1980); see also Juelich, 682
N.W.2d at 571. The stream-of-commerce
theory was adopted by Minnesota in Rostad, in which a New
Jersey manufacturer that owned no property, had no agent, and was
not licensed to do business in Minnesota was
held subject to personal jurisdiction in Minnesota. 372 N.W.2d at 718, 720-22. In Rostad,
the defendant manufactured weights for baseball bats. Id. at 718. One of these flew off a bat and permanently
injured an umpire. Id. The owner of the company stated that he did
not know that the bat weight was ever sold in Minnesota,
but the court noted that the defendant entered into contracts with distributors
to sell the product throughout the United States. Id. at
721. Additionally, the owners traveled
extensively to promote the product and encouraged professional teams such as
the Minnesota Twins to use the product in order to create a national
Juelich is a recent Minnesota Supreme
Court examination of personal jurisdiction in the context of product liability. 682 N.W.2d at 565. In Juelich,
the plaintiff was injured while servicing a scissor-lift table incorporated into
a laser-cutting machine. Id.
The table and the laser machine were manufactured in Japan by separate firms. Id. The laser machine was distributed
internationally and sold to a Minnesota
supplier, which in turn sold the laser machine to the injured plaintiff’s employer. Id. at
568. The Minnesota Supreme Court found
that although 122 laser machines containing the scissor-lift component were
sold in the United States
and 17 machines were sold in Minnesota,
the quantity of contacts with the Japanese table manufacturer was not
sufficient to confer personal jurisdiction.
Id. at 573. The Juelich
court distinguished Rostad and noted
that the table manufacturer produced only a component of the larger machine
product, did not conduct any distribution or marketing efforts of its products
anywhere in the United
States, and did not participate in the
distribution of the laser machine. Id. Additionally, the court noted that the table
manufacturer’s relationship with the distributor of its products was confined
to Japan and that its
distributor had no distribution or sales connection with the larger laser
machine in the United States. Id.
manufactured the final product, not just a component; directly entered into an
agreement with an American distributor, who was very active in Minnesota; attended the distributor’s sales meeting in Iowa; and established an incentive program in the United States, open to Minnesota dealers, to encourage sales of the
machines. As for the number of units
sold, the case before us is close to Juelich. We note that 41 McHale machines have been
sold in Minnesota,
of which 23 are bale wrappers. Although
it is a close call, we conclude that because McHale’s activities are more
consistent with Rostad than with the
component manufacturer in Juelich and
because McHale was directly involved with Vermeer in placing its machines in a
national stream of commerce that included Minnesota, that this quantity-of-contact
factor favors Minnesota exercising personal jurisdiction.
B. Nature and Quality of the Contacts
reviewing the quality of contacts, the courts look to whether the defendant
purposefully availed itself of the benefits and protections of Minnesota law. Dent-Air,
Inc., 332 N.W.2d at 907; Johnson
Bros. Corp. v. Arrowhead Co., 459 N.W.2d 160, 163-64 (Minn. App. 1990). The requirement that the defendant
“purposefully avail” itself of Minnesota
law seeks to ensure that jurisdiction does not result based on “random,”
“fortuitous,” or “attenuated” contacts or from the “unilateral activity of
another party or third person.” Schuck v. Champs Food Sys., Ltd., 424
N.W.2d 567, 569-70 (Minn. App. 1988) (quoting Burger King v. Rudzewicz, 471 U.S.
462, 475, 105 S. Ct. 2174, 2183 (1985)
argues that it did not purposefully avail itself of Minnesota law and relies on
Juelich, 682 N.W.2d at 574, Welsh v. Takekawa Iron Works Co., 529
N.W.2d 471, 475 (Minn. 1995), and Johnson
Bros., 459 N.W.2d at 163-64, to support its claim. The Juelich
court found that the only evidence presented to support the second factor was a
single meeting in Japan, at
which the table manufacturer was informed that the laser machines were destined
for the United States
and was instructed to attach warning labels in English. 682 N.W.2d at 574. The case before us is distinguishable because
McHale was actively involved in promoting its products in the United States.
Welsh and Johnson Bros. are distinguishable because those cases involved
products that came to Minnesota
through the unilateral actions of a middleman.
Welsh, 529 N.W.2d at 475; Johnson Bros., 459 N.W.2d at
163-64. In Welsh, a Japanese company manufactured rip-saws, which it sold
through two distributors in Florida and Arizona. 529 N.W.2d at 472, 474-75. One of the distributors sold a saw to another
company, which then sold it to the plaintiff’s employer. Id. Similarly in Johnson Bros., the defendant, a fireworks manufacturer and
distributor, sold fireworks in southern and western states and did not sell any
fireworks in Minnesota. 459 N.W.2d at 162. A middleman fireworks supplier was unable to
fill its order made by a company, which put on fireworks displays, and this
middleman supplier contacted the defendant to fill this single order. Id.
contrast, McHale contracted with a national equipment firm located in Iowa to sell McHale’s
farm machinery, and it was through this distributor that Woller received the
bale wrapper that caused his injury.
Additionally, its relationship with the United
States market was not attenuated; McHale visited Iowa, a neighboring
state, to attend a sales meeting and instituted a reward program. Although McHale did not know the ultimate
destination of individual machines, it was aware of how many pieces of
equipment were going to dealers in each region.
We conclude the nature and quality of the contacts were such that McHale
should have been aware that some of its machines would be used in Minnesota and
that this factor supports holding McHale subject to personal jurisdiction in this
C. Source of Contacts
between the contacts and the cause of action is generally examined in terms of
general or specific jurisdiction. See Marshall v. Inn on Madeline Island,
610 N.W.2d 670, 674 (Minn. App. 2000) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8-9, 104 S.
Ct. 1868, 1872 nn. 8-9 (1984)).
General jurisdiction exists when the defendant has “continuous and
systematic” contacts with the forum state.
“Specific jurisdiction exists when the cause of action arises out of or
is related to the defendant’s contact with the forum state.” Id. A single contact with the forum can give rise
to specific jurisdiction if the cause of action arose out of that contact. Id.
McHale argues and
Vermeer concedes that this case does not involve general jurisdiction. McHale relies on Juelich and Johnson Bros.
in arguing that the specific connection of selling the machine to a distributor
who introduced it into Minnesota does not
exercise of jurisdiction. Both Juelich and Johnson Bros. are distinguishable because both involved a more
attenuated distribution network and, in the case of Juelich, incorporating a part into a larger piece of equipment. Juelich,
682 N.W.2d at 575; Johnson Bros., 459
N.W.2d at 164-65. Unlike Juelich and Johnson Bros., here there were no intervening suppliers, but rather
Vermeer, the distributor with which McHale contracted, directly supplied McHale
machines to Minnesota,
a neighboring state. There should be no
surprise that McHale’s manufacturing of the machine pursuant to the Agreement
with Vermeer would lead to the machines reaching Minnesota.
That Woller, a farmer and dealer, might be injured because of an alleged
manufacturing defect should not be a surprise.
In fact, the Agreement between McHale and Vermeer specifically recognizes
that McHale will be liable for defending
and insuring Vermeer against product
liability, tort, and contract claims arising out of the use of the equipment it
manufactures. Based on this clause,
McHale and its insurer should clearly anticipate being involved in defending
Vermeer throughout the United
For McHale to be defending itself is a minor additional step. This factor favors exercising personal
jurisdiction over McHale.
Interest in Providing a Forum
McHale argues that
does not have an interest in providing a forum because Woller should be able to
recover from Vermeer, and this case involves an issue of indemnity like that
addressed by the court in Juelich. 682 N.W.2d at 575. In Juelich,
the injured party settled and was not part of the appeal. Id. The appeal consisted of cross-claims between
the Japanese table manufacturer and the Japanese laser-machine manufacturer and
distributor. Id. The Juelich
court also noted that the table manufacturer supplied only a component of the machine
and that, even if the plaintiff were still involved in the suit, he could pursue
a claim against the manufacturer and distributor of the finished product. Id. at
575. Here, McHale is the manufacturer of
the finished product. Woller has not
settled his claims with Vermeer and is still involved in the suit. Moreover, there is a possibility that McHale
is solely responsible for the design flaw and that it failed to notify Vermeer
of this design flaw. The injured party
should be able to assert his claims against all parties in one forum to resolve
possible conflicting claims. Because Minnesota has an
interest in providing its citizens such a forum, this factor supports exercising
personal jurisdiction over McHale.
E. Convenience of the Parties
Convenience of the
parties is a neutral factor when witnesses will be required to travel regardless
of the forum. Juelich, 682 N.W.2d at 575-76.
Here, as in Juelich, some
witnesses may face international travel.
However, in this case Woller and Vermeer are located within a few hours’
drive or a short flight of each other. Only
McHale witnesses will be obliged to travel a long distance. Additionally, McHale signed a contract in
which it agreed to indemnify and to defend Vermeer in this type of situation
and presumably contemplated the possibility of travel to the United States
argues that there is no personal jurisdiction because Vermeer labels were on
the products and Vermeer took great steps to ensure that its customers believed
that the machines were actually made by Vermeer. It does not appear that this marketing tactic
was intended to insulate McHale from the American courts, but to impress the
marketplace with Vermeer’s comprehensive design and manufacturing
capacity. This aspect of the case should
not insulate the ultimate, undisclosed manufacturer from the jurisdiction of Minnesota courts.
The five factors support
jurisdiction. Minnesota’s assertion of jurisdiction does
not offend traditional motions of fair play and substantial justice. Conferring personal jurisdiction on McHale
conforms with due process requirements.