Opposition Brief — Tokai Corp. v. Saia (No. 06-1112)

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No. 06-1112

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IN THE WR

Supreme Court of the United States

TOKAI CORPORATION,

Petitioner,

HELEN M. SAIA, et al.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

APPELLATE COURT OF ILLINOIS, FIRST JUDICIAL DISTRICT

BRIEF IN OPPOSITION FOR

RESPONDENT HELEN M. SAIA

ROBERT P. SHERIDAN

Counsel of Record

ROBERT A. CLIFFORD

RICHARD F. BURKE

CLIFFORD LAW OFFICES

120 N. LaSalle Street

31st Floor

Chicago, IL 60602

(312) 899-9090

KENNETH CHESEBRO

EMILY J. STEVENS

P.O. Box 381070

Cambridge, MA 02238

(617) 661-4423

Attorneys for Respondent

Helen A. Saia

April 6, 2007

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BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS

Question Presented

Whether the Illinois appellate court below erred in its

interlocutory decision rejecting a personal jurisdiction

defense in a products liability case, where:

e@ Petitioner Tokai Corporation, a Japanese

company, designed the product (an “Aim ‘N

Flame” butane lighter).

e The product was manufactured by Tokai’s

wholly owned corporate affiliate located in

Mexico, using component parts shipped to

it by Tokai.

e The product was sold throughout the

United States by Tokai’s wholly owned

corporate affiliate located in California,

which shipped it to various retailers,

including K Mart.

@ Sales of the product in Illinois concededly

were not “an isolated instance,” and it is

reasonable to infer that aggregate Illinois

sales were “substantial.” Pet. App. 15a.

@ The product was purchased in an Illinois

K Mart and later caused a fire in Illinois

which fatally burned an infant (allegedly

due to its negligent design), after which

the infant's mother sued Tokai in an

Illinois court.

e By having all product design, manufacture,

and sale functions carried out by itself or

by members of its wholly owned corporate

family, Tokai obtained “all profits from the

manufacture and sale in [Illinois] of the

product it designed,” profits which were

“considerable.” Pet. App. 15a.

Table of Contents

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A. Tokai’s Design, Manufacture, and Distribution

System for Its “Aim ‘N Flame” Butane Lighter ... 1

B. Tokai’s Profits From Illinois Sales.............. 2

C. The Illinois Lawsuit Against Tokai ............. 3

D. Tokai’s Personal Jurisdiction Defense........... 3

Reasons for Denying the Writ ..............02eeee: 4

I. This Court Lacks Jurisdiction Under

28 U.S.C. § 1257(a) to Review the Illinois

Appellate Court’s Interlocutory Decision

on Personal Jurisdiction ............ccecceeeees 4

II]. The “Question Presented” by Tokai Is Not

Actua!l!y Presented on the Record of This Case

Ill. This Case Involves a Garden-Variety

Application of a Personal Jurisdiction

Ruie Which Has Been Settled for Decades,

and Presents No Occasion for Revisiting

the Opinions in the 1987 Asahi Case............ 8

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Table of Authorities

CASES: PAGE:

Asahi Metal Industry Co. v. Superior Court

of California, 480 U.S. 102 (1987) ............ 8-11

Cox Broadcasting Corp. v. Cohn,

a Ge ee i ao os Vie ek can ba eee e 4-6

Florida v. Thomas, 532 U.S. 774 (2001) ............. 4

Gray v. American Radiator & Standard

Sanitary Corp., 176 N.E.2d 761 (Ill. 1961) ..... 9-10

Jefferson v. City of Tarrant, 522 U.S. 75 (1997) ....... 4

Mercantile National Bank v. Langdeau,

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Stein v. Rio Parismina Lodge, 695 N.E.2d 518

(RE till Ch ON tee or bans 5

World-Wide Volkswagen Corp. v. Woodson,

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STATUTE. RULE, AND REGULATORY MATERIAL:

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Multi-Purpose Lighters; Advance Notice of Proposed

Rulemaking; Request for Comments and

Information, 62 Fed. Reg. 2.327 (Jan. 16, 1997)... 2

Jurisdiction

This Court lacks jurisdiction under 28 U.S.C. § 1257(a)

to review the Illinois appellate court’s interlocutory decision

on personal jurisdiction, which did not effectively determine

the entire litigation, and which did not even effectively

determine the personal jurisdiction issue on a complete

record. The Illinois appellate court’s holding was limited to

a finding that the “uncontradicted facts” in the truncated

record before it were inadequate to permit the trial court to

dismiss the case without “hold[ing] an evidentiary hearing

.... Pet. App. 6a, 16a. See pages 4-6, infra.

Statement of the Case

A. Tokai’s Design, Manufacture, and Distribution

System For Its “Aim ‘N Flame IT” Butane Lighter

The record facts and inferences drawn from those facts

on which the Illinois appellate court based its legal analysis

of the personal jurisdiction issue are as follows.

Petitioner Tokai Corporation, a Japanese corporation,

is the designer of the “Aim ‘N Flame II” disposable butane

lighter. Pet. App. 3a."

Tokai arranged to have Scripto-Tokai Corporation

(“Scripto-Tokai”), its wholly owned subsidiary based in

California, serve as its exclusive distributor in the United

States for these butane lighters and other lighters. Pet.

App. 3a.

Scripto-Tokai had its subsidiary, JMP Mexico,

manufacture the “Aim ‘\ Flame” butane lighters in Mexico.

Pet. App. 3a. Some of the component parts used by JMP

were manufactured by Tokai. Pet. App. 3a-4a.

‘In its question presented, Tokai asserts it “sold its design to its U.S.

subsidiary ....” Pet. ati. No record citation is provided, and the Illinois

appellate court never made any such finding, even though its factual

findings were detailed. We know of no record evidence substantiating this

assertion. This assertion is not repeated iri Tokai’s statement of the case.

Seripto-Tokai, acting as both Tokai’s wholly owned

subsidiary and its exclusive distributor in the United States,

sold the butane lighters to K Mart and other retailers, and

these retailers resold them to consumers in Illinois. Pet.

App. 4a.

B. Tokai’s Profits From Illinois Sales

“Substantial” numbers of the butane lighters were

purchased by consumers in Illinois. Pet. App. 15a.”

Through its integrated design, manufacture, and

distribution system for the “Aim ‘N Flame II” butane

lighters — by having all product design, manufacture, and

sale functions carried out by itself or by members of its

wholly owned corporate family — Tokai obtained “all profits

from the manufacture and sale in [Illinois] of the product it

designed,” profits which were “considerable.” Pet. App. 15a.°

* The general inference drawn by the Illinois appellate court that the

Illinois purchases of the butane lighters were “substantial” reflected the

truncated factual record before the court, which did not permit an exact

count of sales of the butane lighters in Illinois. The truncated record was

due to Scripto-Tokai, which in discovery refused to supply details on the

level of sales in Illinois. Scripto-Tokai and Tokai claimed to be unaware

of the number of butane lighters sold in Illinois. Pet. App. 4a. See also

Pet. at 8-9. If on remand Tokai seeks and is granted an evidentiary

hearing, respondent is prepared to submit official federal government

statistics, and other data, concerning the millions of Tokai-designed

lighters sold each year in the United States during the period relevant to

this lawsuit and the deaths and injuries caused by such lighters,

particularly to children. E.g., Multi-Purpose Lighters, Advance Notice of

Proposed Rulemaking; Request for Comments and Information, 62 Fed.

Reg. 2,327, 2,328-29 (Jan. 16, 1997). Tokai likewise is free on remand to

supply any information on Illinois sales which it previously was unable

to provide.

* That Tokai ultimately received all the profits from the design,

manufacture, and sale of the butane lighters sold in Illinois was never

disputed by Tokai. In the Illinois courts Tokai merely observed that it did

not “directly” profit from the sales, in the sense that under the

distribution system it had set up, many of the necessary business

functions were performed by its wholly owned corporate affiliates. Pet.

App. 4a-5a; see also Pet. at 6 (observing that Tokai “does not directly

C. The Illinois Lawsuit Against Tokai

Prior to June 3, 1999, respondent Helen A. Saia bought

one of the Tokai-designed “Aim ‘N Flame II” butane lighters

at a K Mart in Illinois. Pet. App. 3a.

On June 3, 1999, her 3-year-old son got his hands on

the butane lighter while the family slept. Due to the

negligent design of the butane lighter, her son accidentally

started a fire which engulfed the room where his baby sister,

Alexis, was sleeping. As a result of the severe burns she

suffered, two months later Alexis died. Pet. App. 2a-3a.

This lawsuit, filed in Illinois court, followed.

D. Tokai’s Personal Jurisdiction Defense

Tokai moved to dismiss based on its personal

jurisdiction defense, setting forth evidence by way of

affidavit to the effect that, other than designing the product

and supplying component parts for its manufacture, it relied

on its wholly owned corporate affiliates to carry out the

manufacturing and distribution process for sale in the

United States — and that its corporate office was, and

remains, unaware of what specific actions were taken by its

wholly owned corporate affiliates regarding the marketing

and sale of the product in Illinois. Pet. App. 3a-4a.

Without holding an evidentiary hearing, the trial judge

granted Tokai’s motion. Pet. App. 4a-5a. An appeal was

taken. The Illinois appellate court held that the trial court

had erred in granting Tokai’s personal jurisdiction defense

on the truncated record before it, without holding an

evidentiary hearing, and it remanded the case for further

proceedings. Pet. App. 6a, 16a.

profit from the sale or marketing of products sold in Illinois”). Tokai

never disputed that its indirect profits from [Illinois sales were

considerable, and the Illinois appellate court found “the record sufficient

to support the conclusion that Tokai obtained considerable indirect benefit

from the profits its wholly owned subsidiary earns from sales in [linois

of lighting rods Tokai designed.” Pet. App. ida.

Reasons for Denying the Writ

I. This Court Lacks Jurisdiction Under

28 U.S.C. § 1257(a) to Review the Illinois

Appellate Court’s Interlocutory Decision

on Personal Jurisdiction

Since the creation of this Court in 1789, Congress has

limited its “authority to review federal-question decisions

made by state courts... to cases in which the State’s

judgment is final.” Jefferson v. City of Tarrant, 522 U.S. 75,

80 (1997) (citing Judiciary Act of 1789, § 25, 1 Stat. 85).

Under 28 U.S.C. § 1257(a), only “[f]inal judgments or

decrees rendered by the highest Court of a State in which a

decision could be had” fall within this Court’s jurisdiction.

In general, “a state-court decision is not final” within

the meaning of Section 1257(a) “unless and until it has

effectively determined the entire litigation.” Jd. at 84.

Obviously, this case does not satisfy that general rule. The

Illinois appellate court decision below, no matter how it had

turned out, would not have effectively determined the entire

litigation — only whether one of several defendants named

in the lawsuit (Tokai) would remain in the lawsuit. As it

turned out, the decision resulted in a remand which allowed

proceedings against Tokai to continue. Pet. App. 16a.

Only in a “limited set of situations” has this Court

“found finality as to the federal issue despite the ordering of

further proceedings in the lower state courts.” Id. at 82

(internal quotation marks omitted). In Cox Broadcasting

Corp. v. Cohn, 420 U.S. 469 (1975), cases in this line of

authority were divided “into four categories.” Florida uv.

Thomas, 532 U.S. 774, 777 (2001). Here, Tokai relies solely

on the fourth category identified in Cox, 420 U.S. at 482-85

(citing Mercantile National Bank v. Langdeau, 371 U.S. 535

(1963) (cited in Pet. at 1 n.1)).

With respect to this fourth category under which a state

court decision can be deemed “final” for purposes of review

in this Court despite the ordering of a remand for further

proceedings, Tokai must meet each of four requirements:

1. “the federal issue has been finally decided

in the state courts”;

2. in the later proceedings, Tokai “might

prevail on the merits on nonfederal grounds, thus

rendering unnecessary review of the federal issue

by this Court”;

3. “reversal of the state court on the federal

issue would be preclusive of any further litigation

on the relevant cause of action rather than merely

controlling the nature and character of, or

determining the admissibility of evidence in, the

state proceedings still to come”; and

4.“a refusal immediately to review the state-

court decision might seriously erode federal policy

”

Cox, 420 U.S. at 482-83.

Here, at minimum Tokai cannot meet the first and

fourth requirements. It did not even argue these points in

its petition, thus waiving any argument it might have made.

Regarding the first requirement, it is far from clear that

the federal-question issue regarding persona! jurisdiction

has been finally decided by the Illinois courts. As the

Illinois appellate court noted, under Illinois law, “[ijf the

parties’ evidence leaves a material issue of fact whose

resolution will determine whether the trial court has

personal jurisdiction over the defendant, the trial court must

hold an evidentiary hearing concerning jurisdiction.” Pet.

App. 6a (citing Stein v. Rio Parismina Lodge, 695 N.E.2d

518, 521 (Ill. App. Ct. 1998)). Here, the court further noted,

the trial court did not hold an evidentiary hearing, but

instead “decided the issue of personal jurisdiction based

solely on documents in the record....” Jd. Observing that

“{a] defendant’s uncontradicted evidence can in some cases

defeat jurisdiction,” the court was explicit about the very

limited appellate review of the personal jurisdiction issue it

was performing at this juncture of the case: “[W]Je review

the record only to determine whether the uncontradicted

facts here demonstrate that constitutional due process

forbids the exercise of personal jurisdiction over Tokai.” Pet.

App. 6a (emphasis added). Based on this standard of

review, the court ruled against Tokai, reversed the trial

court’s dismissal of the case, and remanded for further

proceedings. Pet. App. 16a.

Given the truncated nature of the record which was

presented to the Illinois appellate court (due to tactical

choices by Tokai and Scripto-Tokai, see note 2, supra), its

ultimate decision was a limited one: that, given the record

before it, the trial court had erred in granting Tokai’s motion

to dismiss without holding an evidentiary hearing. The

court’s reasoning would appear to leave Tokai free, on

remand, to seek such a hearing based on any additional

evidence it was not able to have considered previously.

Thus, Tokai has failed to meet its burden of demonstrating

that the federal issue it identifies has been finally decided in

the state courts.

Even if there were some basis for concluding that the

federal issue has been finally decided, there is no basis for

concluding that a refusal by this Court to immediately

review the Illinois appellate court's decision might seriously

erode federal policy (e.g., federal policy regarding free speech

or other vital constitutional values). If this Court denies

immediate review of the personal jurisdiction question, it

will merely result in Tokai remaining in this lawsuit, along

with its wholly owned subsidiary, Scripte-Tokai. That will

involve little if any additional burden on Tokai given that

Scripto-Tokai has conceded persona! jurisdiction and Tokai

is being represented by the same law firm which is

representing Scripto-Tokai — so that the only additional

expense involved with Tokai remaining a named defendant

is the incremental cost of the law firm addressing particular

aspects of the litigation which relate only to Tokai.

Tokai has not met its burden of showing that all four

requirements of the fourth “Cox category” are met in this

case. Thus, this Court lacks jurisdiction at this juncture.

Il. The “Question Presented” by Tokai Is Not

Actually Presented on the Record of This Case

Even if this Court possessed jurisdiction to entertain

Tokai’s petition for certiorari at this juncture, this case does

not actually present the question which Tokai has framed

for this Court’s consideration. Tokai bases its petition on

five so-called “undisputed” points, Pet. at i, but all five

points are, on this record, very much in dispute:

Tokai asserts “it is undisputed that. . . petitioner has

no minimum contacts with Illinois....” Pet. ati. The court

below found “that Tokai has sufficient contacts with Illinois

for the court to exercise jurisdiction over Tokai for purposes

of litigating Helen’s claim that Tokai negligently designed

the Aim ‘n Flame II lighting rods.” Pet. App. 16a.

Tokai asserts “it is undisputed that... petitioner sold

its design to its U.S. subsidiary ....” Pet. ati. Far from

being undisputed, we know of no evidence supporting this

assertion. See note 1, supra. Weighing against the notion

that a forma! “sale” occurred is Tokai’s admission that there

is no formal contract between it and Scripto-Tokai, its

subsidiary, regarding the lighters. Pet. App. 3a.

Tokai asserts “it is undisputed that... petitioner plays

no role in the operation of’ Scripto-Tokai. Pet. at i.

However, Tokai admits it owns all the stock of Scripto-

Tokai, and further admits it has no formal] contract with

Scripto-Tokai for its work as Tokai’s exclusive distributor of

the butane lighter and other products throughout the United

States. Pet. App. 3a. Tokai’s admitted inability to control

the distribution of its product through a formal contract

reasonably supports the inference that Tokai, instead,

maintains operational control by virtue of its sole ownership

of Scripto-Tokai. The very informality of the contractual

relationship weighs against any inference that Tokai plays

“no role” in Scripto-Tokai’s operations — and certainly there

is no basis for saying this point is “undisputed.”

Tokai asserts “it is undisputed that... the product was

manufactured in Mexico by a Mexican corporation without

petitioner’s knowledge or involvement....” Pet. ati. To the

contrary, what is undisputed, as the Illinois appellate court

noted, is that “Tokai manufactured some of the component

parts of the Aim ‘n Flame II lighting rods,” Pet. App. 3a-4a

— so it not only knew that its Mexican affiliate was using

these components; it was involved in manufacturing these

components and shipping them to its Mexican affiliate.

Tokai asserts “it is undisputed that . . . without

petitioner’s knowledge or involvement, [Scripto-Tokai]

distributed the product into the national stream of

commerce from which it ended up in Illinois.” Pet. ati. As

set forth above, this assertion ignores Tokai’s admission that

it had no formal contract with Scripto-Tokai regarding its

exclusive distribution agreement for the United States,

reasonably supporting the inference that Tokai used its

ownership of Scripto-Tokai, not contract law, to control its

conduct in carrying out the distribution agreement.

A petitioner is free to frame a question presented as it

sees fit. Tokai has framed a question presented which

depends for its validity on a flawed account of five

supposedly “undisputed” points. Its question is not actually

presented by this case, providing a second independent

ground for denying review. See Rule 14.1(a) (“Only the

questions set out in the petition, or fairly included therein,

will be considered by the Court.”); Rule 14.4 (“The failure of

a petitioner to present with accuracy, brevity, and clarity

whatever is essential to ready and adequate understanding

of the points requiring consideration is sufficient reason for

the Court to deny a petition.”).

III. This Case Involves a Garden-Variety Application

of a Personal Jurisdiction Rule Which Has Been

Settled for Decades, and Presents No Occasion for

Revisiting the Opinions in the 1987 Asahi Case

Finally, the central legal issue discussed in Tokai’s

petition has nothing to do with this case. Tokai urges this

Court to grant review to settle an assertedly important

conflict among the two plurality opinions in Asahi Metal

Industry Co. v. Superior Court of California, 480 U.S. 102

(1987), concerning the “stream of commerce” test. Asahi was

a foreign company which sold a small part of its annual

production for use as acomponent in the product of another

foreign company. That company ultimately sued Asahi for

indemnification on a tort claim in California state court —

a forum which had little if any connection to the transaction

between the two foreign companies, and little if any interest

in the result of this litigation over indemnification.

But the Illinois appellate court did not rely on either

plurality opinion in Asahi. It had no occasion to address the

complex points set out in those plurality opinions, or in

Justice Steven’s separate opinion. Indeed, it did not even

cite Asahi. Instead, it applied a well-settled rule, dating

back decades to Gray v. American Radiator & Standard

Sanitary Corp., 176 N.E.2d 761 (Ill. 1961), under which a

company which takes part in the “stream of commerce”

flowing toward one or more States, and derives substantial

profit from its activity, has no valid due process objection to

being sued by a resident of a State where the product is sold,

remains, and causes injury. Pet. App. 8a-16a (citing Gray).

This Court cited Gray with approval in World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98 (1980):

[Ijf 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. Cf.

Gray v. American Radiator & Standard Sanitary

Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961).

See also id. at 315 (Marshall, J., joined by Blackmun, J.,

dissenting) (“The majority apparently acknowledges that if

a product is purchased in the forum State by a consumer,

that State may assert jurisdiction over everyone in the chain

of distribution. See ante, at 297-98. With this I agree.”).

This well-settled rule is dispositive of this case, as the

Illinois appellate court recognized in relying on Gray.

Nothing in the Asahi plurality opinion by Justice O’Connor

marked a departure from this rule. Indeed, several points

made in that plurality opinion further reinforced the

continued vitality of the Gray rule. For example:

The plurality opinion explained that a key concern with

the assertion of jurisdiction in Woodson was that “the state

court sought to base jurisdiction not on any act of the

defendant, but on the foreseeable unilateral actions of the

consumer.” Asahi, 480 U.S. at 110 (plurality opinion of

O’Connor, J., joined by Rehnquist, C.J., and Powell and

Scalia, J.J.). That concern is inapplicable in this case.

Among the examples set forth of conduct by a defendant

purposefully directed toward the forum State which can

support a finding of “minimum contacts,” the plurality

opinion included conduct indicating “an intent or purpose to

serve the market in the forum State, for example, designing

the product for the market in the forum State... or

marketing the product through a distributor who has agreed

to serve as the sales agent in the forum State.” Jd. at 112

(emphasis added). Here, Tokai both designed the product

and had its wholly owned subsidiary serve as its exclusive

distributor throughout the United States.

As part of its explanation of why Asahi did not have

“minimum contacts” with California, the forum state, the

plurality opinion noted that Asahi “did not create, control,

or employ the distribution system that brought its valves to

California.” Jd. at 112. Here, of course, Tokai has a wholly

owned subsidiary in the United States which it tasked to

distribute the “Aim ‘N Flame J]” butane lighter throughout

the United States, and which it controls through its

ownership of the subsidiary, not through any formal

distribution contract. Thus, exactly contrary to the facts in

Asahi, here Tokai did “create, control, or employ the

distribution system” that brought its product to Illinois.

If the detailed analysis set forth in the bulk of Tokai’s

petition for certiorari is credited, there may well be some

issues regarding the proper interpretation of the Asahi

opinions which are important in a wide enough range of

cases to merit this Court’s attention in the near future,

assuming an appropriate case presents itself. However, this

case is not a viable vehicle for the decision of such issues

because the decision below by the Illinois appellate court

does not turn on anything which was disputed in Asahi, but

is instead a garden-variety application of a personal

jurisdiction rule which has been settled for decades, one

which Tokai has not asked this Court to revisit.

Conclusion

For all the reasons set forth above, the petition for

certiorari should be denied.

Respectfully submitted.