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Book v. Voma Tire Corp.

Supreme Court of Iowa

March 6, 2015

DYLAN BOOK and KAREN BOOK, Appellants,
v.
VOMA TIRE CORPORATION, HUNTER ENGINEERING COMPANY, IOWA TIRE, INC., HOLT SALES AND SERVICE, INC., SICE, S.p.A. and SICE AUTOMOTIVE Equipment Societa Italiana Costruzioni Elettromeccaniche S.I.C.E.-S.p.A, Defendants, and DOUBLESTAR DONGFENG TYRE COMPANY, LTD., Appellee. VOMA TIRE CORPORATION, HUNTER ENGINEERING COMPANY and IOWA TIRE, INC., Third-Party Plaintiffs,
v.
JIM BOOK, Individually and JIM BOOK d/b/a ALLEY AUTO SALES, Third-Party Defendant

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[Copyrighted Material Omitted]

Page 578

Appeal from the Iowa District Court for Dallas County, Bradley McCall, Judge. Plaintiffs in products-liability action, who seek recovery for personal injuries from allegedly defective tire that exploded during inflation at Iowa workplace, appeal ruling dismissing Chinese tire manufacturer for lack of personal jurisdiction.

Neil Ray Chamberlin and James Bruce McMath of McMath Woods P.A., Little Rock, Arkansas, and Robert A. Nading II of Nading Law Firm, Ankeny, for appellants.

Kevin M. Reynolds of Whitfield & Eddy P.L.C., Des Moines, for appellee.

OPINION

WATERMAN, Justice.

Page 579

In this appeal, we must confront unsettled federal precedent to decide whether a Chinese tire manufacturer that sold thousands of tires in Iowa through an American distributor may be compelled to defend a lawsuit here consistent with the Due Process Clause of the United States Constitution. The tire exploded as an Iowan was airing it up at his father's business in Adel, Iowa. The Iowan suffered

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severe and permanent injuries and, through his mother, filed suit in his home county seeking recovery from the tire manufacturer, alleging the tire's design was defective and unreasonably dangerous and prone to explode during inflation. The manufacturer filed a motion to dismiss for lack of personal jurisdiction, which the district court granted. We retained the plaintiff's appeal.

This case presents our first opportunity to address the " stream of commerce" test for personal jurisdiction in a products-liability, personal-injury case since the United States Supreme Court's sharply divided decision in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. , , 131 S.Ct. 2780, 2785, 180 L.Ed.2d 765, 772 (2011). For the reasons explained below, we hold that the Federal Constitution permits the exercise of personal jurisdiction over this high-volume, foreign manufacturer whose allegedly dangerous product purchased in Iowa injured a resident here. Accordingly, we reverse the district court's jurisdictional ruling and remand the case to proceed on the merits.

I. Background Facts and Proceedings.

Jim Book owns and operates an auto repair shop, Alley Auto Sales in Adel, Iowa. In October 2009, Jim's seventeen-year-old son, Dylan Book, worked part-time for him through an apprenticeship affiliated with Dylan's high school. Jim agreed to sell and mount a new set of tires on a customer's horse trailer. Jim bought from an Iowa retailer four LT 285/R16 10-ply Treadstone tires manufactured in China by Doublestar Dongfeng Tyre Company, Ltd. (Doublestar). On the morning of October 20, Jim began mounting the tires. When he tried to air one up, he had trouble getting the tire to seat properly on the wheel rim. He failed to realize he was attempting to mount a sixteen-inch tire on an older model 16.5" rim, a common mistake. Distracted by a phone call, Jim left the tire mounted on the wheel rim but underinflated. Dylan and a coworker, Cody Donnelly, stepped into the shop. Without talking to his father, Dylan began to air up the tire with Donnelly next to him.[1] The tire exploded, severely injuring Dylan. The explosion blinded Dylan in one eye and deprived him of part of his jaw, much of his sense of taste and smell, and left him with partial use of his left arm and hand. His injuries and rehabilitation have involved treatment by a dozen different medical specialists in this state.

Dylan's mother, Karen Book, filed a products-liability action in the Iowa District Court for Dallas County, their home county, seeking money damages for Dylan's personal injuries and medical expenses and her loss of consortium. The petition, filed October 8, 2010, initially named as defendants Hunter Engineering Company (the company that designed and sold the machine used to mount and inflate the tire); Iowa Tire, Inc. (the Iowa retailer that sold the accident tire to Alley Auto Sales); Holt Sales and Service, Inc. (the Iowa-based wholesaler that sold the accident tire to Iowa Tire); and Voma Tire Corporation (Voma), a national tire distributor that sold the accident tire to Holt. On April 20, 2012, plaintiffs amended their petition to name as additional defendants Doublestar and Societa Italiana Costruzioni Elettromeccaniche S.I.C.E. S.p.A.

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(SICE) (an Italian corporation that manufactured the mounting machine). Plaintiffs allege that the Treadstone tire used an unreasonably dangerous multistrand weftless bead prone to fail if the sixteen-inch tire is inflated on a 16.5" rim, a foreseeable occurrence.[2]

SICE and Doublestar filed motions to dismiss for lack of personal jurisdiction. In July 2012, the district court granted SICE's motion and deferred ruling on Doublestar's motion to allow jurisdictional discovery to " resolve the question of how the tire arrived in Iowa and . . . the number of times that tires have been shipped directly into Iowa and the volume of tires so shipped." The defendants answered interrogatories and requests for production and plaintiffs' counsel deposed corporate representatives of Doublestar and Voma. The evidentiary record establishes the following facts.

Doublestar is a Chinese corporation with its principal place of business in China. Doublestar manufactures tires in Shiyan City, located in Hubei Provence in central China. Doublestar, one of the ten largest tire manufacturers in China, produced nearly 3.2 million tires in the nine months preceding Dylan's accident.[3] Hundreds of thousands of those Doublestar tires were sold in the United States in 2009 through two American distributors: Greenball Tire Corporation, based in California, and Voma. Doublestar has no employees or offices in the United States and does not advertise in this country.

Voma is a Tennessee corporation with its principal place of business in Memphis. Voma owns the " Treadstone" trademark and has been selling Treadstone tires since 2008. Doublestar is one of Voma's several tire suppliers. About twenty-five to thirty percent of Voma's sales in 2008 and 2009 were tires manufactured by Doublestar. Voma provided Doublestar with a mold to stamp " Treadstone" on the sidewall of these tires during the manufacturing process, and Voma exclusively sold the Treadstone tires in the United States. Voma's revenue from tire sales dropped from ten million dollars in 2010 to zero when it ceased selling tires by late 2012. Voma remained in business servicing warranty claims.

When Voma ordered tires from Doublestar in 2009, it provided detailed shipping requirements to the Chinese manufacturer. Doublestar delivered the tires F.O.B.[4] to a port in Wuhan, China. There, the shipping company placed the tires in containers to be loaded on freighters destined for the United States. Doublestar completed each order by providing instructions to the shipper as directed by Voma. To save on shipping costs, Voma frequently instructed Doublestar to have the tires shipped from China directly to distribution centers in states including Iowa, Oklahoma, and Texas.

Page 582

Voma, not Doublestar, selected the destination of shipments from China and paid the shipping costs. Doublestar received the shipping instructions from Voma and directed the shipping company accordingly. Doublestar knew the destinations identified on the shipping documents containing Voma's requirements. Voma routinely sent Doublestar the bill of lading after each shipment was complete, which identified each destination. Doublestar in turn maintained a spreadsheet showing the destination for every tire it sold to Voma.

As of October 20, 2009, Voma had purchased 180,000 tires from Doublestar. Voma sold 16,700 of those Doublestar tires to Holt in Iowa. On sixteen occasions in 2008 and once in 2009, Voma instructed Doublestar to ship the tires directly from China to Holt in Des Moines, bypassing Voma's Tennessee facility. Those seventeen direct shipments from China to Iowa conveyed a total of 12,681 tires. None of those seventeen China-to-Iowa shipments included any 10-ply tires of the same model as the accident tire, but some of the containers included a similar 14-ply Treadstone tire. The Doublestar witness testified its employees knew some containers of tires were shipped directly to " Des Moines, IA" but denied those persons knew " IA" meant the State of Iowa.

Doublestar sold Voma 7008 of the 10-ply Treadstone tire model, the type involved in Dylan's accident, 999 of which Voma sold to Holt in Iowa. In the month leading up to Dylan's accident, Voma was selling approximately 150 of the 10-ply tires to Holt every two weeks. Voma shipped all of these 10-ply tires from its warehouse in Tennessee. The DOT number stamped on the accident tire indicates Doublestar manufactured it in China in early June of 2009. In 2009, Holt purchased seven shipments of the 10-ply tires, all from Voma's warehouse in Tennessee.

In May 2013, after completion of jurisdictional discovery, the district court granted Doublestar's motion to dismiss. The district court made a factual finding that the accident tire was shipped from China to Voma's warehouse in Memphis and found no 10-ply tires were shipped directly to Iowa from China. The district court found the tires directly shipped from China to Des Moines were a different model. Plaintiffs dismissed their claims against the remaining parties on October 13, 2013, pursuant to a confidential settlement and appealed Doublestar's dismissal. We retained the appeal. At oral argument, counsel for Doublestar conceded that Doublestar would be subject to personal jurisdiction in Tennessee, Voma's home state.[5]

II. Standard of Review.

" 'We review a district court's decision on a motion to dismiss for lack of personal jurisdiction for correction of errors at law.'" Sioux Pharm, Inc. v. Summit Nutritional Int'l, Inc., N.W.2d , , (Iowa 2015) (quoting Shams v. Hassan, 829 N.W.2d 848, 853 (Iowa 2013)). " We are not bound by the court's conclusions of law or application of legal principles. The district court's factual findings are binding on appeal if supported by substantial evidence." Id. (citation omitted).

" [W]e accept as true the allegations of the petition and the contents of uncontroverted affidavits." Shams, 829 N.W.2d at 853 (internal quotation marks

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omitted). " After the plaintiff makes a prima facie case showing that personal jurisdiction is appropriate, the burden shifts to the defendant to rebut that showing." Id.

III. Analysis.

We must decide whether the Due Process Clause of the United States Constitution permits the exercise of personal jurisdiction over Doublestar in Iowa. This issue requires us to revisit the stream-of-commerce test of personal jurisdiction in light of J. McIntyre Machinery and its progeny. We conclude that the stream-of-commerce test as adopted in World-Wide Volkswagen Corp. and followed by our precedent remains good law. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297--98, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 501--02 (1980); Svendsen v. Questor Corp., 304 N.W.2d 428, 430--31 (Iowa 1981). We hold Doublestar, a large, high volume manufacturer selling to a national market, is subject to personal jurisdiction in Iowa based on its direct shipments to Iowa of thousands of tires and indirect shipments of thousands more to this state through its American distributor, including the allegedly hazardous " accident tire" that injured the Iowa plaintiff at his workplace in Iowa.

We begin by discussing the constitutional boundaries of personal jurisdiction. Next, we trace the development of the stream-of-commerce test and its competing formulations set forth in several divided opinions of the U.S. Supreme Court and applied inconsistently in the lower courts. Our survey of contemporary precedent nationwide persuades us the Svendsen test we have used in Iowa products-liability cases should be applied in this case, and we decline to adopt a more restrictive test as to a high-volume manufacturer of a potentially hazardous product. Finally, we apply the test and determine that Doublestar is subject to jurisdiction in Iowa in this products-liability action.

A. Overview of Constitutional Limitations on Personal Jurisdiction.

Iowa's jurisdictional rule " authorizes the widest jurisdictional parameters allowed by the Due Process Clause." Capital Promotions, L.L.C. v. Don King Prods., Inc., 756 N.W.2d 828, 833 (Iowa 2008); see also Iowa R. Civ. P. 1.306 (" Every corporation, individual, personal representative, partnership or association that shall have the necessary minimum contact with the state of Iowa shall be subject to the jurisdiction of the courts of this state . . . ." ). Therefore, we confine our analysis to the federal constitutional requirements for personal jurisdiction.

" The Due Process Clause of the Fourteenth Amendment sets the outer boundaries of a state tribunal's authority to proceed against a defendant." Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. , , 131 S.Ct. 2846, 2853, 180 L.Ed.2d 796, 805 (2011). " The Due Process Clause protects an individual's right to be deprived of life, liberty, or property only by the exercise of lawful power." J. McIntyre Mach., 564 U.S. at , 131 S.Ct. at 2786, 180 L.Ed.2d at 773 (plurality opinion). " As a general rule, neither statute nor judicial decree may bind strangers to the State." Id. at __, 131 S.Ct. at 2787, 180 L.Ed.2d at 774. " A court may subject a defendant to judgment only when the defendant has sufficient contacts with the sovereign 'such that the maintenance of the suit does not offend " traditional notions of fair play and substantial justice." '" Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945)). We recently reaffirmed that " '[f]airness is the crux of the minimum-contacts analysis.'" Sioux Pharm, N.W.2d at , (quoting Shams, 829 N.W.2d at 854).

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The concept of minimum contacts, in turn, 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.

World-Wide Volkswagen Corp., 444 U.S. at 291--92, 100 S.Ct. at 564, 62 L.Ed.2d at 498. Personal jurisdiction is only appropriate when " the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." Id. at 297, 100 S.Ct. at 567, 62 L.Ed.2d at 501. " Random or attenuated contacts with the forum state do not satisfy the minimum contacts test." Ostrem v. Prideco Secure Loan Fund, LP, 841 N.W.2d 882, 891 (Iowa 2014).

There are two forms of personal jurisdiction, general and specific. Id. at 892. General jurisdiction " 'refers to the power of a state to adjudicate any cause of action involving a particular defendant, regardless of where the cause of action arose.'" Id. (quoting Sondergard v. Miles, Inc., 985 F.2d 1389, 1392 (8th Cir. 1993)). General or " all-purpose" jurisdiction exists only when the defendant is " essentially at home in the forum State." Goodyear, 564 U.S. at , 131 S.Ct. at 2851, 180 L.Ed.2d at 803; see also Sioux Pharm, N.W.2d at , (applying Goodyear " at home" test). Neither party argues that general ...


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