Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—W.D. Wash.: Merely placing product in stream of commerce did not confer jurisdiction, (Dec 19, 2013)

By Jody Coultas, J.D.

A federal district court in Seattle did not have jurisdiction over Hahn Bros. Inc. because the company did not have the minimum contacts with Washington State to confer jurisdiction (Starbucks Corporation v. Wellshire Farms, Inc., December 17, 2013, Pechman, M.).

Starbucks Corporation introduced sandwiches it believed to have Wellshire Farms’ Black Forest ham. In reality, the ham was processed by Hahn. After Starbucks received customer complaints about spoiled ham, it settled claims against non-party sandwich assemblers for losses they suffered from the alleged defective ham. The assemblers then assigned their rights to bring claims against Hahn and Wellshire to Starbucks.

Starbucks brought an action against Hahn and Wellshire Farms for violation of the Washington Consumer Protection Act, breach of contract, breach of implied warranty of fitness, and negligence. Hahn moved to dismiss the claims for lack of personal jurisdiction. Hahn argued that general jurisdiction did not exist, because it neither conducted business in the state nor had a physical presence in Washington, and that specific jurisdiction did not exist because it did not purposefully avail itself of the forum. The imposition of jurisdiction would offend notions of fair play and substantial justice, Hahn asserted.

Starbucks failed to allege facts establishing that Hahn purposefully directed activities to the residents of Washington sufficient to support the claims pleaded here, according to the court. Starbucks alleged Hahn’s placement of a defective product into the stream of commerce with knowledge it would be used in Starbucks’ sandwiches was sufficient contact for specific jurisdiction.

Mere awareness a product will be placed in the stream of commerce and may reach the forum state is insufficient for the exercise of specific jurisdiction; rather, a company must purposefully direct some action toward the forum state. Hahn did not attempt to serve the market in Washington, market itself in Washington, or otherwise direct its upstream commerce to this district. Hahn had no control over any aspect of the ham’s distribution after it left the Maryland facility with Wellshire’s packaging and imprint.

The losses Starbucks allegedly suffered as a result of Hahn’s defective ham in Washington were not a basis for specific jurisdiction, according to the court. Starbucks argued that a corporation incurs economic loss in the forum of its principle place of business. If Starbucks had alleged intentional torts against Hahn, then this argument would have merit. However, Starbucks did not allege Hahn committed an intentional tort, but alleged breach of contract and negligence.

Starbucks contended that Hahn subjected itself to the court’s jurisdiction by subpoenaing records from Starbucks for use in a separate case in New Jersey. Even if Hahn engaged in civil discovery, Starbucks failed to show that its claims arose from that contact. The allegedly deceptive actions occurred well before the subpoena requests.

The case is No. C13-1170-MJP.

Attorneys: Camille Fisher (Perkins Coie) for Starbucks Corp. Catherine J Bick (Giordano Halleran & Ciesla PC) for Wellshire Farms, Inc. Heather R Beygo (Crosswhite, Limbrick & Sinclair, LLP) and Jeffrey Garcia (Scheer & Zehnder LLP) for Hahn Bros., Inc.

Companies: Starbucks Corporation; Wellshire Farms, Inc.; Hahn Bros. Inc.

Cases: StateUnfairTradePractices WashingtonNews