Should a Korean manufacturer stand trial in a foreign country where he is sued for his allegedly defective products? Here we have a leading case.

Now Precision Co., Ltd. ("Now Precision"), which has a head office in Seoul, supplied cordless "Vatel" phones for years to various department stores in the United States through Mets Consumer Electronics, Inc. ("Mets"), a home appliance importer-distributor in Florida. When a consumer suffered ear pains while using the Vatel phone which he had bought from a Federated Department Store in Miami, he filed a products liability suit against Mets to Dade County Court in Florida. Mets brought in Now Precision as an impleader that the Korean manufacturer had the initial liability. Thus Now Precision received a complaint and a writ from the Florida court.

Now Precision submitted a motion to dismiss the claim arguing that the Dade County Court had no jurisdiction over the foreign defendant. During the proceeding, Maryland Casualty Company ("Maryland") stepped in as a plaintiff after this insurance company indemnified Mets for the damages in accordance with Florida state law. In November 1987, the Dade County court delivered a decision following a jury verdict that Now Precision should make a reparation to Maryland. And it became final. Thus Maryland sought to receive an execution judgment of the Florida judgment from a Korean court.

Products Liability Suit

Products liability suits are prevalent in the United States. Anyone injured while using a product may sue its manufacturer or seller for actual and punitive damages. Section 402A of the Restatement Second of Torts states:

(1) One who sells any products in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
   (a) the seller is engaged in the business of selling such a product, and
   (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it sold.
(2) The rule stated in Subsection (1) applies although
   (a) the seller has exercised all possible care in the preparation and sale of his product, and
   (b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

This section has been widely adopted as the common law or statutory rule in the overwhelming majority of American jurisdictions. Most of U.S. courts have imposed strict liability against the manufacturer/seller of a defective product even though there is no privity between the manufacturer/seller and the plaintiff. In line with consumer protection, strict liability is applied even when there is no evident negligence on the part of a defendant.

In this context, Now Precision was sued before the U.S. court for the allegedly defective product, a cordless phone. However, Now Precision had no business base in Florida except for its business ties with Mets. Therefore Now Precision had to file a motion for judgment of dismissal arguing that Dade County court should exercise no jurisdiction over the defendant. If it did not take any action, the foreign defendant should have been subject to a default judgment.

Finally, the products liability case was decided against Now Precision in the Florida state court. Thus, the plaintiff wanted the U.S. judgment to be executed against the defendant's property in Korea for his damages. In accordance with Article 476 of the Code of Civil Procedure, the execution of a foreign judgment can only take place where the admissibility thereof has been pronounced by a Korean court. Article 203 of the same code provides for the conditions of the afore-mentioned admissibility as follows:

  ァ. The jurisdiction of the foreign court is not disallowed by laws or by treaty;
  ア. The defendant against whom a judgment has been granted being a citizen of Korea, received service otherwise than by publication of summons or order necessary for the commencement of the action, or if he responded to the action without being served;
  ィ. The judgment of the foreign court is compatible with the public policy [good morals and social order] of Korea; and
  イ. There is a mutual guarantee.

Here, determining whether the U.S. court has proper jurisdiction over a Korean company is at issue. As explained before, products liability may be applied where there is no contractual relation between the plaintiff and the defendant. And it is generally accepted that a court may exercise broader jurisdiction over products liability case than with regard to an ordinary torts case. The jurisdiction of a products liability case has a link with the defendant's domicile, the place of business, manufacturing place of products, purchasing place of the plaintiff or the place of injury.

Korean Viewpoint

An international dispute involving a Korean national takes place here. When this case is brought to a foreign court, what principle determines the court's jurisdiction over this lawsuit? The answer is that the court which decides the case applies its own standard. Therefore when a Korean court renders an execution judgment for the foreign court in accordance with Article 476 of the Code of Civil Procedure, it should decide by applying the Korean standard of jurisdiction. Korea Supreme Court Judgment on April 12, 1988 85 Meu 71.

Then what is the prevailing standard of jurisdiction in Korea with respect to an internationally disputed case? Some present an analogy to territorial jurisdiction; and others argue, besides the territorial jurisdiction, rational allocation of jurisdiction on the basis of fair and just treatment of conflicting parties, and proper and speedy process. The latter school stress various points, i.e. comparing and balancing the interests of conflicting parties, preserving legal stability, or respecting international standard on jurisdiction.

The Korea Supreme Court appears to adopt the theory of reason. The Court has determined:
"Now that there is no treaty nor generally accepted principle on international jurisdiction, and we do not have any statutory rule thereon, it is reasonable to determine by means of reason on the basis of the ideal of civil procedure, i.e. fair and just treatment of conflicting parties, and proper and speedy process, whether or not a Korean court may exercise jurisdiction over an internationally disputed case. Because those articles on territorial jurisdiction of the Code of Civil Procedure have followed the said ideal, a Korean court has a good reason to exercise jurisdiction over such a case, if a forum of any conflicting party is situated in Korea." Korea Supreme Court Judgment on July 28, 1992 91 Da 41897.

American Case Law

To review the propriety of the Korean viewpoint as described above, it would be useful to scrutinize the case law of the United States, which consists of more than 50 jurisdictions. In principle, the Due Process Clause of the U.S. Constitution limits the power of a state court to exert personal jurisdiction over a nonresident defendant. The International Shoe Co. v. Washington, 326 U.S. 310 (1945) has established the rule that a state may assert jurisdiction over only those defendants who have certain 'minimum contacts' with the forum State instead of 'physical presence' such that the exercise of jurisdiction does not offend 'traditional notions of fair play and substantial justice.'

The International Shoe test was elaborated in McGee v. International Life Insurance Co., 355 U.S. 220 (1957) in that the Court's minimum contacts analysis increasingly focused on purposeful acts on the part of the defendant that would justify the exercise of jurisdiction. In McGee, the highest court in the U.S. found that the defendant's solicitation of a single insurance policy from a California resident constituted minimum contact with California and sufficiently satisfied the Due Process requirement of International Shoe. It should be noted that California's long-arm statute (Cal. Civ. Proc. Code Ann. 410.10) authorizes the "exercise of jurisdiction on any basis not inconsistent with the Constitution of California or of the United States."

In the 70s and 80s, purposeful availment analysis came to dominate the Court's approach to personal jurisdiction issues. For example, in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), two New York residents injured from an automobile collision on an Oklahoma highway en route to their new home in Arizona brought a products liability suit in Oklahoma state court against numerous defendants, including a New York automobile retailer who had sold the plaintiffs an allegedly defective Audi. Plaintiffs based their jurisdictional argument on the theory of actual foreseeability. They argued that the defendants should have foreseen the possibility that the automobile could be used in another state and may cause injuries there because the product is mobile by design and purpose.

The majority of the Court disclaimed the plaintiffs' actual foreseeability argument, saying "Although foreseeability is not wholly irrelevant . . . 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."

The Court contended that since 'purposeful availment' by the defendants of the 'privilege of conducting activities within the forum State' is absent, Due Process Clause does not permit the asserting of personal jurisdiction over nonresident defendants based on the 'unilateral activity' of plaintiffs over which defendants exercise no control, thus the minimum contacts requirement had not been met.

The same analytical tool was applied in Burger King v. Rudzewicz, 471 U.S. 462 (1985). The defendant in Burger King, a Michigan resident, had entered into a franchise agreement with a Florida corporation. The agreement contemplated a continuing relationship between the parties and required payments to be made in Miami, Florida. Throughout the negotiations, however, the defendant had remained in Michigan; in fact, he had never physically visited Florida. Nonetheless, the Court held that in a lawsuit over an alleged breach of the franchising agreement, the Florida court could constitutionally assert personal jurisdiction over the defendant because the defendant had created a 'substantial connection' with the forum State . . . he manifestly had availed himself of the privilege of conducting business there. Since his activities involved the benefits and protections of the forum's laws, it presumptively is not unreasonable to require the defendant to submit to the burdens of litigation in that forum State as well.

Asahi Metal Case

What if the defendant is a foreign corporation that has no office, no subsidiary, nor an agent in the United States? Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 U.S. 102; 107 S.Ct. 1026 (1987) involved a products liability action that arose from a motorcycle accident in California.

In 1978, a rear tire of a Honda motorcycle blew out seriously injuring the rider and killing his passenger. The defendant sued, among others, Cheng Shin Rubber Industrial Co., Ltd., ("Cheng Shin") the Taiwanese manufacturer that had produced the motorcycle inner tubes and made 20 percent of its total U.S. sales in California. Cheng Shin in turn filed a cross-complaint seeking indemnity from Asahi Metal, the manufacturer of the tube's valve assembly. Asahi Metal, a Japanese corporation, sold 1,350 thousand valve assemblies to Cheng Shin in the period from 1978 to 1982. Asahi Metal valves were incorporated into the tubes of numerous other manufacturers selling their product in California. Asahi Metal, however, had no offices, properties or agents in California and neither solicited business nor made any direct sales in that state.

The U.S. Supreme Court unanimously held that the Due Process Clause prevented California from asserting jurisdiction over Asahi Metal, reasoning that the facts of the case did not establish minimum contacts such that the exercise of personal jurisdiction would be consistent with fair play and substantial justice. The Court, however, was deeply divided on the question of whether the Japanese manufacturer could have purposefully availed itself of the privilege of doing business in California.

The majority, represented by Justice O'Connor, argued that Asahi Metal's position was analogous to that of the defendant in World-Wide Volkswagen. They contended that "the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State." The 'substantial connection' between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. Because Cheng Shin, and not Asahi Metal itself, had made the choice to send Asahi Metal's products to California, there was no purposeful availment and the assertion of jurisdiction was unconstitutional.

On the other hand, the minority opinion written by Justice Brennan argued that the purposeful availment requirement is satisfied once a manufacturer inserts its product into the stream of commerce with knowledge that the product will be eventually used in the forum State. Justice Stevens went further to adopt an intermediate approach, basing the constitutional determination on the volume, the value and the hazardous characteristics of the components at issue. He suggested that in most circumstances, he would have found jurisdiction over a manufacturer such as Asahi Metal constitutionally permissible.

In order to secure the support of other Justices, Justice O'Connor skipped the purposeful availment analysis for the foreign corporation, and concluded that the assertion of jurisdiction would offend traditional notions of fair play and substantial justice, and therefore was unconstitutional considering the burden on the defendant, the interests of the forum State, the plaintiff's interest in obtaining relief, . . . the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared intersts of the several States in furthering fundamental substantive social policies.

Justice O'Connor found the assertion of jurisdiction improper, and relied on international factors of the Asahi Metal case: the unique burdens placed upon one who must defend oneself in a foreign legal system and the potential implications on the United States foreign policy. She also focused on the distance that the defendant would be forced to travel to defend itself, and the fact that the plaintiff's claim against Cheng Shin had been settled, leaving only the indemnity issue to be adjudicated with no California resident involved in the cross-claim.

In short, the interest of the forum State in the resolution of the claim was slight and insufficient to justify the imposition of the serious burdens on Asahi Metal. Thus Asahi Metal has clearly established that the existence of minimum contacts is a necessary but not sufficient condition to satisfy the constitutional requirements for personal jurisdiction.

Now Precision Case

When the American plaintiffs, Mets and Maryland, sought the execution judgment against Now Precision from the Korean court, it reviewed the first condition for the admissibility of the Florida court's judgment under Article 203 of the Code of Civil Procedure. It means whether or not Florida could assert jurisdiction over Now Precision which has no office or agent in that state.

In June 1993, Seoul High Court rejected the plaintiffs' claim because the judgment of the Florida court imposed products liability on the defendant from a remote place where the defendant has no business base, and thus the Florida court could not exercise jurisdiction over the defendant. The court reasoned: "Nowadays the mode of torts is getting complicated, and in particular, the place of injury which results in products liability is beyond expectation due to high mobility of products. If such injury occurs at a distant place from the defendant's domicile or business base, the defendant is burdened with much trouble and inconvenience to appear in a foreign court and to defend himself during the procedure. Therefore, to allow a remote court to exercise international jurisdiction over a tort case is extremely unfair to the defendant and unconstructive to just and proper proceeding." Seoul High Court Judgment on June 15, 1993 93 Na 13171.

The above judgment appears to weigh more importance on the ideal of civil procedure i.e. fair and just treatment of conflicting parties, and speedy and proper process than any other factors. In the United States, as explained before, a court must consider the burden on the defendant, the interests of the forum State, the plaintiff's interest in obtaining relief, . . . the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies.

However, the American case law has provided insight in analyzing the purposeful availment by the defendant of the privileges of conducting business activities within Florida; and foreseeability on the part of the defendant that his product would be used in the state and cause injuries there.

The Supreme Court, citing the prior judgment with regard to the international jurisdiction, rejected the American plaintiffs' claim as groundless. The Court reasoned:
"Now that there is no generally accepted principle of international [public] law with regard to international jurisdiction, and we do not have any statutory rule thereon, it is reasonable to determine by means of reason on the basis of the ideal of civil procedure, i.e. fair and just treatment of conflicting parties, and proper and speedy process. We think those articles on territorial jurisdiction of the Code of Civil Procedure have followed the said ideal. So, if the forum of a party is situated in a foreign country under the above articles on territorial jurisdiction, and if there are no special circumstances contrary to reason in that the case is tried by a foreign court, it is reasonable for the foreign court to exert jurisdiction over the said case. See Korea Supreme Court Judgment on July 28, 1992 91 Da 41897.

In a products liability case, where a manufacturer is sued for his allegedly defective products, it would be reasonable to determine whether or not a foreign court may assert jurisdiction over the defendant on the basis of 'substantial connection' between the manufacturer and the place of injury such that he should reasonably anticipate being haled into the foreign court. In assessing the substantial connection, the court must consider the purposeful acts by the manufacturer who willingly enjoys business interests in the place of injury, for example, the specific design for marketing within the area, the advertisement targeting for regional markets, a regular solicitation from the regional customers, and the local establishment of sales agents.

The defending corporation [Now Precision] has no office or agent in Florida, and it only sold cordless phones to Mets since 1981. Therefore, it is difficult to establish a 'substantial connection' between the defendant and Florida such that he should reasonably anticipate being sued for damage caused by his defective products in Florida. It is reasonable to disclaim the jurisdiction asserted by the court in Florida where the injury took place." Korea Supreme Court Judgment on November 21, 1995 93 Da 39607.

The Korea Supreme Court has apparently adopted several concepts from the U.S. case law such as foreseeability, purposeful acts and substantial connection, even though there exists no provision concerning the due process in the Korean judicial system. There are indeed some differences between Asahi Metal and Now Precision. The former case was adjudicated between two alien parties with no California resident involved ！ a products liability case involving a motorcyle which seemed inherently dangerous. However, Now Precision's cordless phones were not dangerous enough to foresee products liability disputes.

If Now Precision and its affiliates had exported a significant amount of products to the United States each year, and accumulated assets or inventories, the substantial connection between the defendant and the forum State would be regarded as existent. Then the American plaintiffs could seek relief from the defendant's properties in the United States.