Woodrow W. Smith v. Hobby Lobby Stores
968 F. Supp. 1356; 1997 U.S. Dist. LEXIS 9828

Summary prepared by Devashish Bharuka
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The case is a wrongful death action. Smiths bought an artificial Chritmas tree from Hobby Lobby Store in Arkansas. Allegedly, fire began in the vicinity of the tree which destroyed their house and Mary Elizabeth died. Liability case was registered. Defendants sought and was granted leave to file a third-party complaint against Boto and Everstar Merchandise Co. Ltd. Boto, the manufacturer of the tree, a foreign corporation in Hong Kong contended that the mere fact that it manufactured the tree and distributed it to Hobby Lobby Stores, Inc. does not provide sufficient basis for personal jurisdiction.

On question of personal jurisdiction, the Arkansas long-arm jurisdiction provides for jurisdiction to the maximum extent permitted by the due process of law clause of the Fourteenth Amendment of the United State Constitution. The test for due process is existence of sufficient 'minimum contacts' and consistency with traditional notions of fair play and substantial justice. Sufficient contacts exist when one could reasonably anticipate being haled into court there which is found on the basis of defendant's activities of purposefully availing itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Boto, inter alia, contended that it is a foreign corporation, is no authorized to do business in Arkansas, has no employee, representative or agent in Arkansas, dealt with Hobby Lobby only in Oklahoma, is not aware that Hobby Lobby has any stores in Arkansas and had no knowledge of how or where the products were distributed or sold by Hobby Lobby. On the other hand, Hobby Lobby asserted that the gross amount of Boto manufactured products sold in the United States was quite high and it was foreseeable that Boto's products could end up in any state in the United States. It was further, inter alia, asserted that Hobby Lobby receives at its home office a monthly trade publication entitled Hong Kong Enterprise in which Boto advertises and which is also available on the Internet at http://www.tdc.org.hk.

Parties cited cases dealing with the stream of commerce theory. Court observed that the placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State. Additional conduct of the defendant may indicate an intent or purpose to serve the market in the forum State, like, advertising in the forum State. But a defendant's awareness 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.

Plaintiffs suggested that, by selling millions of dollars worth of its product each year to the country's largest national retailers, Boto is utilizing a significant United States distribution network. Boto argues that sales to direct customers, even if the direct customers are nationwide retailers, are not the same as utilizing a distribution system. The Court agreed.

With regard to the advertising on the Internet, Boto stated that the Internet address does not contain any advertising or listing for Boto. Further, it argued that the mere advertisement on the Internet surely did not mean that a company is subject to personal jurisdiction at each and every location on the planet where someone is capable of logging on the Internet.

The Court held that the alleged Internet posting by or in behalf of Boto is simply insufficient "contact" with Arkansas to support haling this Hong Kong business into the courts of Arkansas.

Held, there is no personal jurisdiction.