State v. LG Electronics, Inc. , 186 Wash. 2d 169 ( 2016 )

González, J.

¶1 The State of Washington sued more than 20 foreign electronics manufacturing companies (including the petitioners) for price fixing. The State claimed the foreign companies conspired to fix prices by selling CRTs (cathode ray tubes) into international streams of commerce intending they be incorporated into products sold at inflated prices in large numbers in Washington State.

¶2 The trial court dismissed on the pleadings, finding it did not have jurisdiction over the foreign companies. The Court of Appeals reversed, concluding the State alleged sufficient minimum contacts with Washington to satisfy both the long-arm statute and the due process clause. We affirm the Court of Appeals.

Facts

¶3 In 2012, the State, through the attorney general, filed suit against a number of foreign electronics manufacturers. The State’s complaint alleged that between March 1995 and November 2007, the defendants violated the antitrust provision of the Washington Consumer Protection Act (CPA), RCW 19.86.030, by conspiring to raise prices and set production levels in the market for CRTs. CRTs were the dominant display technology used in televisions and computer monitors before the advent of LCD (liquid crystal display) panels and plasma display technologies. Due to the unlawful conspiracy, the State alleged, Washington consumers and the State of Washington itself paid supracom-petitive prices for the products.

¶4 According to the State’s complaint, North America was the largest market for CRT televisions and computer monitors during the conspiracy period. Clerk’s Papers (CP) at 24. In 1995 alone, 28 million CRT monitors were purchased in North America. Id. CRT monitors “accounted for over 90 percent of the retail market for computer monitors in North America in 1999,” CRT televisions “accounted for 73 percent of the North American television market in 2004,” and “the CRT industry was dominated by relatively few companies.” Id. at 17, 15. In 2004, four of the defendants together held a collective 78 percent share of the global CRT market. Id. at 15. The State alleged that during the conspiracy period, all the defendants manufactured, sold, and/or distributed CRT products, directly or indirectly, to customers throughout Washington.

¶5 The State asserted jurisdiction pursuant to the long-arm provision of the Washington Consumer Protection Act, RCW 19.86.160. The State also asserted that venue is proper in King County in part because

the Defendants’ and their co-conspirators’ activities were intended to, and did have, a substantial and foreseeable effect on Washington State trade and commerce; the conspiracy affected the price of CRTs and CRT Products purchased in Washington; and all Defendants knew or expected that products containing their CRTs would be sold in the U.S. and into Washington.

CP at 3.

¶6 Before any discovery took place, certain defendants (collectively Companies) moved to dismiss the State’s complaint for lack of personal jurisdiction under CR 12(b)(2). The Companies supported their motions to dismiss with affidavits and declarations stating that the Companies did not sell any products directly to Washington consumers and did not conduct any business in Washington. The Companies also requested attorney fees under Washington’s long-arm statute.

¶7 The State argued it had pleaded facts sufficient to establish personal jurisdiction at the pleading stage. The State also argued that if the trial court were to consider the Companies’ affidavits and declarations, the motions to dismiss would necessarily be converted into CR 56 motions for summary judgment. The State requested the opportunity to conduct general and jurisdictional discovery. The Companies opposed the State’s discovery request.

¶8 The trial court granted the motion to dismiss for lack of personal jurisdiction without expressly addressing the State’s discovery request. Id. at 578-79. The trial court also authorized the Companies to request costs and attorney fees. Id. at 597. In March 2013, the trial court entered final judgment with prejudice under CR 54(b). Id. at 598-608. It then granted the requests for costs and attorney fees.¹ Id. at 1070-83. The State appealed.²

¶9 The Court of Appeals reversed. State v. LG Elecs., Inc., 185 Wn. App. 394, 425, 341 P.3d 346 (2015). It held that the State had sufficiently alleged facts establishing personal jurisdiction and that an assertion of jurisdiction did not offend traditional notions of fair play and substantial justice. Id. at 423-24. The Court of Appeals reversed the award of attorney fees below because the Companies were no longer prevailing parties, and declined to award fees on appeal. Id. at 425.

¶10 We granted the Companies’ petition for review. State v. LG Elecs., Inc., 183 Wn.2d 1002, 349 P.3d 856 (2015). The Companies are supported by the Washington Defense Trial Lawyers and DRI—The Voice of the Defense Bar (on one brief) and the United States Chamber of Commerce as amici curiae. The State is supported in part by the Washington State Association for Justice Foundation as amicus curiae.

Analysis

I. Standard of Review

¶11 We review CR 12(b)(2) dismissals for lack of personal jurisdiction de novo. FutureSelect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 180 Wn.2d 954, 963, 331 P.3d 29 (2014) (citing In re Estate of Kordon, 157 Wn.2d 206, 209, 137 P.3d 16 (2006)). When a motion to dismiss for lack of personal jurisdiction is resolved without an evidentiary hearing, the plaintiff’s burden is only that of a prima facie showing of jurisdiction. MBM Fisheries, Inc. v. Bollinger Mach. Shop & Shipyard, Inc., 60 Wn. App. 414, 418, 804 P.2d 627 (1991) (citing Pedersen Fisheries, Inc. v. Patti Indus., Inc., 563 F. Supp. 72, 74 (W.D. Wash. 1983)).

II. Personal Jurisdiction

¶12 The parties do not dispute that as long as the assertion of personal jurisdiction complies with due process, personal jurisdiction exists under the long-arm provision of the CPA, RCW 19.86.160. The due process clause “requires] that individuals have ‘fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign.’ ” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (second alteration in original) (quoting Shaffer v. Heitner, 433 U.S. 186, 218, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977)). Thus, a state may authorize its courts to exercise personal jurisdiction over an out-of-state defendant only if the defendant has certain minimum contacts with the state, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945). For personal jurisdiction to comply with due process, three elements must be met: (1) purposeful “‘minimum contacts’ ” must exist between the defendant and the forum state, (2) the plaintiff’s injuries must “ ‘arise out of or relate to’ ” those minimum contacts, and (3) the exercise of jurisdiction must be reasonable, that is, consistent with notions of “ ‘fair play and substantial justice.’ ” Grange Ins. Ass’n v. State, 110 Wn.2d 752, 758, 757 P.2d 933 (1988) (quoting Burger King, 471 U.S. at 472-78).

¶13 To establish purposeful minimum contacts, there must be some act by which the defendant “ ‘purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’ ” Burger King, 471 U.S. at 475 (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 2 L. Ed. 2d 1283 (1958)). The parties agree on the applicable test but disagree over whether this requirement has been met.

¶14 A foreign manufacturer or distributor does not purposefully avail itself of a forum when the sale of its products there is an “isolated occurrence” or when the unilateral act of a consumer or other third party brings the product into the forum state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980); Williams v. Romarm, SA, 410 U.S. App. D.C. 405, 756 F.3d 777 (2014). But where a foreign manufacturer seeks to serve the forum state’s market, the act of placing goods into the stream of commerce with the intent that they will be purchased by consumers in the forum state can indicate purposeful availment. J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 881-82, 131 S. Ct. 2780, 180 L. Ed. 2d 765 (2011) (Kennedy, J., lead opinion); id. at 888-89 (Breyer, J., concurring); Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 109-13, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (1987) (O’Connor, J., lead opinion); id. at 117-21 (Brennan, J., concurring), 122 (Stevens, J., concurring); World-Wide Volkswagen, 444 U.S. at 295-97; Grange Ins. Ass’n, 110 Wn.2d at 761-62. The stream of commerce theory does not allow jurisdiction based on the mere foreseeability that a product may end up in a forum state. See, e.g., World-Wide Volkswagen, 444 U.S. at 295-97. Instead, the defendant’s conduct and connection with the state must be such that it should reasonably anticipate being haled into court there. Id. The State argues that the Companies have established purposeful minimum contacts by placing CRTs into the stream of commerce with the knowledge and intent that their CRTs would be incorporated into products sold in massive quantities throughout the United States, including in large numbers in Washington. See State of Wash.’s Suppl. Br. at 1.

¶15 The Companies argue that the State cannot rely solely on the substantial volume of sales in Washington to establish purposeful availment. See Suppl. Br. of Pet’rs at 13-15. The Companies argue that the State is required to show additional actions specifically targeting Washington, such as forum-specific design or in-forum advertising. The Companies rely on Asahi, 480 U.S. 102, and J. McIntyre, 564 U.S. 873, where the United States Supreme Court issued fractured opinions on the stream of commerce theory.

¶16 In Asahi, the United States Supreme Court considered the stream of commerce theory in the context of an indemnification action brought in California by Cheng Shin, a Taiwanese tire manufacturer, against Asahi, the Japanese tire valve manufacturer that had sold an allegedly defective component part to Cheng Shin. 480 U.S. at 106. Cheng Shin had bought and incorporated into its tire tubes hundreds of thousands of Asahi valve assemblies annually for five years, and sold finished tubes throughout the world, including California. Id. The United States Supreme Court unanimously held that regardless of whether Asahi had sufficient minimum contacts with California, it would be unfair to assert personal jurisdiction over the two foreign parties in the indemnity action. Id. at 114. However, the court fractured on whether Asahi had sufficient minimum contacts.

¶17 In a lead opinion authored by Justice O’Connor, four justices concluded that placing a product into the stream of commerce with the mere awareness that the product will be swept into the forum state is insufficient to establish minimum contacts. The justices who signed the lead opinion would have required additional conduct indicating an intent or purpose to serve the specific forum state, including, for example, “designing the product for the market in the forum State, advertising in the forum State, establishing channels for providing regular advice to customers in the forum State, or marketing the product through a distributor who has agreed to serve as the sales agent in the forum State.” Id. at 112 (lead opinion of O’Connor, J., joined by Rehnquist, C.J., and Powell and Scalia, JJ.). The lead opinion concluded that Asahi did not have purposeful minimum contacts. Id. at 113.

¶18 Justice Brennan’s concurrence, joined by three justices, concluded that Asahi had sufficient minimum contacts with California. Those justices concluded that a defendant can be subject to jurisdiction consistent with due process whenever the “regular and anticipated flow of products,” as opposed to “unpredictable currents and eddies,” leads the product to be marketed in the forum state. Id. at 116-17 (Brennan, J., joined by White, Marshall, and Blackmun, JJ.).

¶19 Justice Stevens concurred separately, finding no need to address the minimum contacts inquiry but indicating that whether placement of a product into the stream of commerce rises to purposeful availment will depend on “the volume, the value, and the hazardous character of the components” and opining that Asahi “has arguably engaged in a higher quantum of conduct than ‘ [t] he placement of a product into the stream of commerce, without more.’ ” Id. at 122 (alteration in original) (Stevens, J., joined by White and Blackmun, JJ.). He noted that “[i]n most circumstances I would be inclined to conclude that a regular course of dealing that results in deliveries of over 100,000 units annually over a period of several years would constitute ‘purposeful availment’ even though the item delivered to the forum State was a standard product marketed throughout the world.” Id.

¶20 In J. McIntyre, the United States Supreme Court again considered the stream of commerce theory and again issued a fractured opinion. 564 U.S. 873. J. McIntyre Machinery Ltd., a British manufacturer, sold its metal shearing machines to an independent United States distributor, which marketed the machines throughout the United States. Id. at 878 (lead opinion of Kennedy, J., joined by Roberts, C.J., and Scalia and Thomas, JJ.). The distributor sold no more than four of the machines to a company in New Jersey, and one allegedly malfunctioned and injured the plaintiff. Id. Justice Kennedy’s plurality, joined by three justices, adopted a position consistent with Justice O’Con-nor’s Asahi opinion and concluded that the plaintiff had not established that J. McIntyre engaged in conduct purposefully directed at New Jersey. Id. at 885-86.

¶21 Justice Breyer, joined by Justice Alito, concurred, but rejected the plurality’s strict rule and concluded on narrow grounds that under the court’s split opinions in Asahi, personal jurisdiction could not be exercised on the basis of a single sale in a state because there was no regular flow of sales or a showing of forum-specific targeting. Id. at 888-89 (Breyer, J., concurring, joined by Alito, J.). These justices also rejected the expansive view proposed by New Jersey that a manufacturer is subject to personal jurisdiction so long as it places its products into the stream of commerce and should know that its products might end up being sold in any of the 50 states, reasoning that such an expansive rule would permit every State to assert jurisdiction against any domestic manufacturer who sells its products to a national distributor “no matter how large or small the manufacturer, no matter how distant the forum, and no matter how few the number of items that end up in the particular forum at issue.” Id. at 891.

¶22 When a fragmented United States Supreme Court decides a case “and no single rationale explaining the result enjoys the assent of five Justices, ‘the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.’ ” Marks v. United States, 430 U.S. 188, 193, 97 S. Ct. 990, 51 L. Ed. 2d 260 (1977) (quoting Gregg v. Georgia, 428 U.S. 153, 169 n.15, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976) (plurality opinion)). Applying the Marks standard, we conclude that Justice Breyer’s concurring opinion represents the holding of J. McIntyre. We reject the Companies’ argument that Justice Breyer’s opinion endorsed Justice O’Connor’s construction of the stream of commerce theory in Asahi. Justice Breyer explicitly did not choose either test from Asahi. J. McIntyre, 564 U.S. at 889-90 (Breyer, J., concurring).

¶23 Under J. McIntyre, a foreign manufacturer’s sale of products through an independent nationwide distribution system is not sufficient, absent something more, for a State to assert personal jurisdiction over a manufacturer when only one product enters a state and causes injury. Id. at 888-89 (Breyer, J., concurring). J. McIntyre did not foreclose an exercise of personal jurisdiction over a foreign defendant where a substantial volume of sales took place in a state as part of the regular flow of commerce. Our interpretation of McIntyre is consistent with that of other courts. See Russell v. SNFA, 2013 IL 113909, 987 N.E.2d 778, 370 Ill. Dec. 12 (rejecting defendant’s contention that Justice Breyer’s concurrence should be construed as adopting Justice O’Con-nor’s construction of the stream of commerce theory); Willemsen v. Invacare Corp., 352 Or. 191, 282 P.3d 867 (2012) (finding that the sale in Oregon in a two-year period of more than 1,000 wheelchairs containing the manufacturer’s component part established sufficient minimum contacts); see also Monje v. Spin Master Inc., No. CV-09-1713-PHX-GMS, 2013 WL 2369888, 2013 U.S. Dist. LEXIS 75330 (D. Ariz. May 29, 2013) (court order) (finding that the sale of 4.2 million products throughout the United States indicates purposeful availment of forum state market);³ cf. Oticon, Inc. v. Sebotek Hr’g Sys., LLC, 865 F. Supp. 2d 501, 513 (D.N.J. 2011) (finding insufficient minimum contacts where the defendant targeted the national market but only five to nine sales of the product occurred in the forum state).

¶24 We find the allegations in the State’s complaint sufficient to establish a prima facie case of purposeful minimum contacts. The State alleges that (1) the Companies together dominated the global market for CRTs, (2) the Companies sold CRTs into international streams of commerce with the intent that the CRTs would be incorporated into millions of CRT products sold across the United States and in large quantities in Washington, and (3) along with their coconspirators, the Companies intended for their price-fixing activities to elevate the price of CRT products purchased by consumers in Washington. CP at 15, 3. Taking these allegations as verities, as we must at this stage, we agree with the State that “[t]he presence of millions of CRTs in Washington was not the result of chance or the random acts of third parties, but a fundamental attribute of [the Companies’] businesses.” State of Wash.’s Suppl. Br. at 17.⁴

¶25 An exercise of jurisdiction based on the allegations in the State’s complaint is not foreclosed by J. McIntyre, and to dismiss at this stage before relevant jurisdictional discovery would be inconsistent with the legal standards we apply under CR 12(b). While we have few CR 12(b)(2) cases, we find our CR 12(b)(6) cases helpful by analogy. Our liberal notice pleading rules are intended “to facilitate the full airing of claims having a legal basis.” Berge v. Gorton, 88 Wn.2d 756, 759, 567 P.2d 187 (1977). Consistent with this purpose, CR 8(a)(1) provides that a complaint need only set forth “a short and plain statement of the claim showing that the pleader is entitled to relief” and we have repeatedly emphasized that we grant CR 12(b)(6) motions for failure to state a claim very “ ‘sparingly and with care.’ ” Orwick v. City of Seattle, 103 Wn.2d 249, 254-55, 692 P.2d 793 (1984) (quoting 27 Federal Procedure, Lawyers Edition § 62:465 (1984) and citing 5 Charles Allen Wright & Arthur R. Miller, Federal Practice and Procedure § 1349, at 541 (1969)). A complaint survives a CR 12(b)(6) motion if any state of facts could exist under which the claim could be sustained. Id. at 255; Corrigal v. Ball & Dodd Funeral Home, Inc., 89 Wn.2d 959, 961, 577 P.2d 580 (1978). We see no reason to apply a different approach to a CR 12(b)(2) motion, and in fact we previously took such an approach in FutureSelect, where we reversed a trial court’s decision to dismiss on the pleadings after considering numerous arguments for dismissal, including a CR 12(b)(2) argument. 180 Wn.2d at 959. There, we concluded that “[a]t this stage of litigation, the allegations of the complaint establish sufficient minimum contacts to survive a CR 12(b)(2) motion.” Id. at 963. We found that the trial court dismissed prematurely, some limited discovery was warranted, and defendant “may renew its jurisdictional challenge after appropriate discovery has been conducted.” Id. at 966, 963. Consistent with these standards, we find the State’s complaint survives. Nothing in our opinion precludes the Companies from renewing their motions after further discovery bearing on relevant facts.⁵ The Companies argue that since they submitted declarations the State cannot stand on the allegations in its complaint but must submit evidence to meet its burden, citing federal case law holding that courts are not permitted to “ ‘assume the truth of allegations in a pleading which are contradicted by affidavit.’ ” Suppl. Br. of Pet’rs at 19 (internal quotation marks omitted) (quoting Alexander v. Circus Circus Enters., Inc., 972 F.2d 261, 262 (9th Cir. 1992)). None of the Companies’ affidavits contradict the stream of commerce allegations in the complaint, however, except arguably that of Koninklijke Philips Electronics NV (KPNV), which claims it is merely a holding company and did not manufacture any products. See CP at 105. Jurisdictional discovery as to KPNV at this stage may be warranted because “ ‘pertinent facts bearing on the question of jurisdiction are controverted.’” Boschetto v. Hansing, 539 F.3d 1011, 1020 (9th Cir. 2008) (quoting Data Disc, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280, 1285 n.1 (9th Cir. 1977)). Prior to appropriate discovery, however, we decline to find that an allegation in the complaint is defeated by a contrary statement in a declaration.⁶ With the State having sufficiently asserted purposeful minimum contacts at this stage, the burden shifts to the Companies to present a compelling case that the exercise of jurisdiction is unreasonable and inconsistent with notions of fair play and substantial justice, “ ‘consideration being given to the quality, nature, and extent of the activity in the forum state, the relative convenience of the parties, the benefits and protection of the laws of the forum state afforded the respective parties, and the basic equities of the situation.’ ” FutureSelect, 180 Wn.2d at 963-64 (internal quotation marks omitted) (quoting Shute v. Carnival Cruise Lines, 113 Wn.2d 763, 767, 783 P.2d 78 (1989)). At this stage, all of these considerations weigh strongly in favor of finding that jurisdiction is reasonable. The inconvenience for the large, multinational Companies to defend themselves in the forum they intentionally targeted with price-fixed products does not outweigh the State’s strong interest in ensuring Washington citizens receive the protection of state antitrust laws, especially since Washington is the only forum in which indirect consumers of CRTs may be entitled to recovery.

Conclusion

¶26 Taking the allegations of the complaint as true, we find that the State has made a prima facie showing of purposeful minimum contacts and that asserting personal jurisdiction over the Companies is not unfair or unreasonable. We affirm the Court of Appeals and remand for further proceedings consistent with this opinion.⁷

Johnson, Fairhurst, Wiggins, and Yu, JJ., and Hunt, J. Pro Tem., concur.

1 The Philips entities, which did not submit briefing requesting costs and attorney fees, are an exception.

2 Certain defendants also moved to dismiss on the grounds that the State’s claims were time barred. The trial court denied the motion and certified the matter for discretionary review. The Court of Appeals granted discretionary review of that issue, linked the appeals, and affirmed the trial court’s denial of the statute of limitations motions in a separate published opinion. We granted the defendants’ petition for review in that case as well and resolve the statute of limitations question by separate opinion in State v. LG Electronics, Inc., 186 Wn.2d 1, 375 P.3d 636 (2016).

3 We note that this opinion is unpublished and citation by the parties is proper under GR 14.1(b) and Fed. R. App. R 32.1(a).

4 The Companies also call to our attention Walden v. Fiore, where the United States Supreme Court concluded that a Nevada court could not assert personal jurisdiction over a police officer who seized cash from the plaintiffs at an airport in Georgia while they were traveling from Puerto Rico to Nevada. _ U.S. _, 134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014). The Court concluded it was not sufficient to base minimum contacts solely on the plaintiff’s connections with Nevada and the fact that the plaintiffs felt the effects of the delayed return of their gambling funds while they were residing in Nevada. Under those circumstances, the police officer’s connection to Nevada was not purposeful but merely “ ‘random’ ” and “ ‘fortuitous.’ ” Id. at 1123 (quoting Burger King, 471 U.S. at 475). Walden is not helpful to our analysis in the present case, where it is alleged that the Companies intended to serve the Washington market and injure Washington consumers with price-fixed CRT products. See CP at 3, 27; Calder v. Jones, 465 U.S. 783, 791, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984) (holding that jurisdiction in California was proper because intentional conduct by defendants in Florida was “calculated to cause injury to respondent in California’’).

The dissent posits that we should look only to Calder and Walden, not to the J. McIntyre line of cases, in our personal jurisdiction analysis, distinguishing between a “stream of commerce’’ test and an “effects” test. Dissent at 189. We note that this question is not presented in this case, as neither of the parties asked us to distinguish these tests and disregard the stream of commerce one. In the absence of briefing from the parties, we decline to adopt the dissent’s approach.

5 Our dissenting colleague concludes the court lacks personal jurisdiction because the State did not specifically allege in its complaint that the defendants had control over the prices of CRT products sold in Washington. We note that, as discussed, the State alleged that the defendants conspired with CRT and CRT product manufacturers to “ensure! ] that price increases for CRTs were passed on to indirect purchasers of CRT Products.’’ CP at 20. These allegations are sufficient to survive a motion to dismiss on the pleadings.

6 Given our resolution of the case, we decline the invitations of the parties and amici curiae to outline specific procedures required for a trial court to resolve CR 12(b)(2) motions. At this juncture, we leave it to the discretion of trial courts to resolve CR 12(b)(2) motions in accordance with relevant Washington court rules.

7 Given our disposition, we conclude that the Court of Appeals properly reversed the trial court’s award of attorney’s fees to the companies, and we decline the companies’ request for attorney’s fees for this appeal.