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    Wisconsin's 'Stream of Commerce' Theory of Personal Jurisdiction

    Kopke v. A. Hartrodt S.r.l. expands the jurisdictional reach of Wisconsin courts by subjecting foreign companies to jurisdiction if they could have known that the goods they handle could injure Wisconsin citizens. Kopke thereby signals the demise of "minimum contacts" as a check on the state's power to exercise jurisdiction over foreign defendants in the personal injury setting.

    Daniel La Fave

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 75, No. 11, November 2002

    Wisconsin's 'Stream of Commerce' Theory of Personal Jurisdiction

    Kopke v. A. Hartrodt S.r.l. expands the jurisdictional reach of Wisconsin courts by subjecting foreign companies to jurisdiction if they could have known that the goods they handle could injure Wisconsin citizens. Kopke thereby signals the demise of "minimum contacts" as a check on the state's power to exercise jurisdiction over foreign defendants in the personal injury setting.

    by Daniel J. La Fave

    Earlier this year, the U.S. Supreme Court put an end to an Italian jurisdictional odyssey by declining to review the Wisconsin Supreme Court's decision in Kopke v. A. Hartrodt S.r.l.1 In Kopke the court held that an Italian labor cooperative that allegedly negligently loaded an ocean-going multimodal container (that is, one that can go by truck, rail, train, or ship) was subject to jurisdiction in a personal injury action brought in Brown County by a Wisconsin truck driver who was injured while attempting to unload the container.

    By declining to intervene, the nation's highest court permitted Wisconsin to adopt an aggressive version of the "stream of commerce" theory of personal jurisdiction in the atypical context of a negligent services action - even though the theory's application in product liability cases, from whence it arose, has provoked controversy. The theory permits a court to exercise jurisdiction over someone who places an alleged injury-producing product into the "stream of commerce" with the expectation that it will be purchased by consumers in the forum state.2 This jurisdictional test is considered to be easier to satisfy than the customary "minimum contacts" approach, which requires proof that a defendant has purposefully directed its activities to the forum state, and thereby invoked the benefits and protections of its laws, as the quid pro quo for subjecting the foreigner to jurisdiction.3

    Kopke, with its aggressive formulation of what is already deemed to be a more permissive test, signals an expansion in the jurisdictional reach of Wisconsin courts. Indeed, the Kopke ruling pushes the stream of commerce theory to its outermost limits by subjecting foreign companies to jurisdiction if they "could have known" that goods that they handle in the ordinary course of business could prove to be injurious to Wisconsin citizens - regardless of whether the companies actually knew or expected them to arrive here. In the dissent's view, the ruling in Kopke effectively spells the demise of "minimum contacts" as a check on Wisconsin's power to exercise jurisdiction over foreign defendants in the personal injury setting and ushers in a new, unduly expansive jurisdictional regime for the state.4 Given the marked shift in Wisconsin law that Kopke represents, practitioners need to master Kopke's lessons in order to effectively navigate Wisconsin's jurisdictional rules.

    The "Stream of Commerce" Debate: Plus or Minus

    Daniel J. 
La FaveDaniel J. La Fave, Northwestern 1992, is a partner in the product liability and litigation groups in the Milwaukee office of Quarles & Brady LLP. He served as lead counsel for the defendant and third-party defendant Riunione Adriatica di Sicurtà S.p.A. in Kopke v. A. Hartrodt S.r.l.

    Following the landmark case of International Shoe Co. v. Washington,5 the U.S. Supreme Court's personal jurisdiction jurisprudence has required a two-tiered due process inquiry. First, a court must determine whether a particular defendant has "purposefully established 'minimum contacts' in the forum state."6 On this point the plaintiff bears the burden of proof.7 Second, if minimum contacts exist, then the court must determine whether asserting jurisdiction "would comport with 'fair play and substantial justice.'"8 As to this point, the defendant bears the burden of presenting a compelling case that exercising jurisdiction over it would be unfair.9 Relevant to this inquiry are various fairness factors such as the burden on the defendant, the plaintiff's interest in obtaining convenient and effective relief, and the forum state's interests in adjudicating the dispute.10

    Jurisdictions that follow the "stream of commerce" theory employ it as a specialized, abbreviated form of the minimum contacts portion of the analysis, customarily in the context of a product liability action. The first time the U.S. Supreme Court articulated the theory was in World-Wide Volkswagen Corp. v. Woodson, a product liability action brought in Oklahoma state court in connection with a car accident in Oklahoma.11 The Court found insufficient grounds to exercise jurisdiction over an automobile wholesaler and retailer that were involved in selling the car in New York. However, in oft-quoted dicta, the Court said that a state did not offend due process by exercising jurisdiction over one who "delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state."12

    Since World-Wide Volkswagen, courts have disagreed about what constitutes a sufficient expectation to satisfy this test. Some courts find the mere act of placing a good into the stream of commerce to be sufficient. Others require more. When the issue next came before it, in Asahi Metal Industry Co. v. Superior Court,13 the U.S. Supreme Court found itself unable to resolve this debate. Instead, the court split evenly on the point. One group of justices, led by Justice O'Connor, advocated what is referred to as the stream of commerce "plus" theory. It requires proof that the defendant had "an intent or purpose to serve the market in the forum state," by conduct such as advertising in the forum.14 For these justices "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."15 The competing plurality, led by Justice Brennan, concluded that such "awareness" was enough.16

    An Errant Pallet of Italian Paper: Prelude to Adopting the Stream of Commerce Theory in Wisconsin

    Image: Container ship with trainAs Timothy Kopke opened one of the doors of a multimodal container in Neenah, a pallet of paper unexpectedly fell out and struck him, rendering him a quadriplegic. Claiming that negligent loading of the container was to blame, Kopke sued several Italian entities involved in shipping it. These included: 1) Cartiere Binda in Liquidazione S.p.A. (Binda), whose successor produced the paper and arranged for its delivery to Wisconsin; 2) Società Cooperativa L'Arciere (L'Arciere), an Italian labor cooperative whose laborers packed the container according to Binda's loading plan; and 3) Riunone Adriatica di Sicurtà S.p.A. (RAS), Binda's insurer.

    L'Arciere launched this jurisdictional odyssey by moving to dismiss for lack of personal jurisdiction. L'Arciere argued that loading the container did not constitute an act of "processing" or "servicing" as contemplated by the local injury/foreign act provision of Wisconsin's long-arm statute, and that the cooperative had insufficient contacts with Wisconsin to satisfy due process requirements.

    After the circuit court denied L'Arciere's motion, the court of appeals granted L'Arciere leave to pursue an interlocutory appeal, which the intermediate court eventually certified to the supreme court.

    Wisconsin's Long-arm Easily Reaches L'Arciere

    The Wisconsin Supreme Court unanimously concluded that L'Arciere's actions constituted "processing" within the purview of the long-arm statute but split 4-3 on what definition of "to process" should apply. The majority, in an opinion written by Justice Bablitch, adopted the Seventh Circuit Court of Appeals' interpretation of the term in Nelson v. Park Industries Inc.17 There, in upholding jurisdiction over a foreign distributor, the Seventh Circuit held that "to process" goods included "subjecting something to a particular system of handling to effect a particular result and preparing something for market or other commercial use by subjecting it to a process."18 The Kopke majority concluded that this "broad definition" best advanced the objective of the long-arm statute to expand personal jurisdiction.19

    The Majority: Tapping Into a Permissive Stream of Commerce Theory

    Before embarking on its due process analysis, the court unanimously jettisoned its dated five-factor test from Zerbel v. H.L Federmen & Co.20 in favor of the U.S. Supreme Court's two-tiered approach from International Shoe and its progeny.21 In doing so, the Wisconsin Supreme Court brought the state's due process approach into the mainstream, thereby enhancing uniformity with other jurisdictions. However, the court split 4-3 on the issues of which mainstream U.S. Supreme Court precedent controlled and whether the requirements of due process had been met.

    The majority concluded that Justice Brennan's formulation of the stream of commerce theory in Asahi was the proper analysis to apply.22 It found that three facts satisfied that test: 1) the contractual relationship between Binda and L'Arciere, pursuant to which they collaborated in the loading of containers; 2) the identification of the cargo's destination as Wisconsin in five loading plans; and 3) damaged cargo reports sent to Binda by its consignee in Wisconsin showing that L'Arciere had loaded at least 39 containers destined for Wisconsin during the six months just before Kopke's accident.23 The majority reasoned that L'Arciere indirectly derived economic benefit from the distribution of Binda's products, and "literally 'played a hand'" in the container arriving in Wisconsin.24

    Regarding L'Arciere's claim that it did not actually know or expect that the cargo was destined for Wisconsin, thereby negating the expectation requirement of the stream of commerce test, the majority found the difference between "know" and "should have known" to be a distinction without meaning.25

    Having found the first part of the International Shoe test to have been satisfied via the stream of commerce route, the court proceeded to consider the fairness prong of the due process calculus. It found three factors to be relevant: 1) Wisconsin's interest in adjudicating the dispute, 2) Kopke's interest in obtaining convenient and effective relief, and 3) the burden on L'Arciere. As to the first, the majority found that Wisconsin had "an unquestionable interest" in providing a forum to adjudicate claims arising in the state.26 As to the second, the majority found that Kopke had an "undeniable interest" in obtaining convenient relief. As to the third factor, the majority distinguished several cases advanced by L'Arciere, noting that unlike the situations in those cases, the arrival of the container in Wisconsin was not "merely fortuitous" but was an intended event. The majority also emphasized that it was not a one-time transaction; rather, L'Arciere had been packing containers destined for Wisconsin on behalf of Binda for years.27 The majority concluded its fairness analysis by finding that L'Arciere had failed to make the requisite compelling case that it would be unreasonable to exercise jurisdiction over it.28

    The Dissent: A Critical Minimum Contacts Analysis

    Justice Crooks, joined by Justices Sykes and Wilcox, remarked that "If what the majority concludes qualifies as minimum contacts is indeed sufficient, then there is, in effect, nothing left of the doctrine of minimum contacts, which would limit the reach of a state court's jurisdiction."29 He found fault with each of the three facts that the majority relied on to satisfy Justice Brennan's stream of commerce test. As to L'Arciere's contract with Binda, Justice Crooks noted that the fact that L'Arciere's personnel worked with Binda's employees "did not establish the requisite awareness that L'Arciere was purposefully making contact with this forum."30 Rather, it was Binda that had chosen to market and deliver its paper to Wisconsin and that stood to profit directly from that choice. L'Arciere did not depend on Wisconsin for any economic benefit, as it would be paid regardless of where any of the containers it loaded was sent.31

    Regarding the five loading plans, Justice Crooks observed that none of their references to Appleton, Neenah, or CTI Paper U.S.A. Inc. (Binda's Wisconsin consignee) revealed that the cities and the business were located in the United States, much less Wisconsin.32

    Finally, concerning the damage reports that were directed to Binda by its Wisconsin consignee, Justice Crooks commented that they did not and could not establish, after the fact, that L'Arciere was "aware" that those containers were heading for Wisconsin. He said that, "It is this thread, L'Arciere's supposed awareness, which, when pulled, unravels the majority's conclusion."33

    Justice Crooks argued that the only way the majority could find the requisite "awareness" and related expectation by L'Arciere that the container was destined for and would arrive in Wisconsin was by adopting Kopke's "constructive knowledge" argument.34 However, he found that Kopke had pointed to no evidence showing that L'Arciere "should have known" that the container was headed to Wisconsin. Justice Crooks distinguished the authority the majority relied upon to support a "should have known" standard as involving classic product distribution networks. He found that the economic incentives implicated for those participating in such distribution networks were absent, and that it was therefore inappropriate to permit constructive knowledge to serve proxy for the requisite "awareness."35 He believed the majority had placed undue significance on the foreseeability of the potential adverse effect of one's allegedly negligent actions in a distant forum - a brand of foreseeability that the U.S. Supreme Court had expressly held is an insufficient benchmark for exercising personal jurisdiction.36

    More Personal Injury Defendants Likely to Be Swept Up

    Although, as noted earlier, the stream of commerce theory is most commonly applied in product liability cases,37 the Kopke court is by no means the first to apply it in the context of alleged negligent loading of cargo. In Logwood v. Apollo Marine Specialties Inc.,38 a federal court in Louisiana discussed several earlier decisions in which the theory had been applied to such a fact pattern. The crucial (and disputed) question for the Logwood court was whether the defendant-Brazilian company that had loaded the cargo in Rio de Janiero "knew or should have known, that the cargo would be unloaded in Louisiana...."39 Because that issue was contested, the court denied the loader's summary judgment motion. Notably, in discussing the Fifth Circuit's pre-Asahi cases (one of which the Kopke majority followed), the court observed that they "evidence[] a very liberal 'minimum contacts' standard."40 As to fairness, the Logwood court observed that the burden on the defendant of defending the case would be severe. However, as did the Kopke majority, the court found the balance weighed in favor of litigating the case where the "allegedly negligently performed service [] has its effect...."41

    The Kopke majority similarly justified its extension of the theory to a negligent service setting, explaining that "Kopke's injuries arose out of commercial activities and the distribution of goods in the stream of commerce."42 The conceptual problem that arises from taking the stream of commerce theory out of its traditional product liability setting is that doing so vitiates an essential element of control that is embedded in the doctrine (not to mention the altogether different economic dynamics that Justice Crooks highlighted).43 A manufacturer or distributor can choose where to market its products and exercise control over how they are sold and upon what terms through contractual means, whereas someone who is preparing another's items for delivery customarily does not. These functions are in the exclusive control of the shipper. Because the majority's test strips away this fundamental control element, it could aptly be termed a stream of commerce "minus" theory.

    Taken to its logical conclusion, the Kopke rule would, in effect, result in organizations such as the United States Postal Service appointing each and every parcel it posts as its agent for service of process at the listed destination should an injurious consequence attend the item's delivery (recent hazards such as anthrax laden letters come to mind).44 Although the U.S.P.S. lacks any exclusive contract like L'Arciere had with Binda, it occupies a unique position in controlling the mails in our country, one that has persisted for years. (Other mail carriers, both foreign and domestic, could find themselves similarly implicated.)

    One might argue that L'Arciere, as with the U.S.P.S., could actively take steps to screen cargo that is going through its hands, and refuse to handle items destined for aggressive jurisdictional havens such as Wisconsin (assuming, of course, its prospective clients would pay for such incomplete service). What the Kopke majority essentially says is: "Handle at your own risk." If there was a way for one to determine the item's destination, then one should have known and realized that injurious effects could result there. The dissent recognized that the imposition of such an obligation has ominous implications for foreign trade.45 Can we reasonably expect that foreign enterprises such as L'Arciere, an Italian labor cooperative based entirely in Italy, will be sophisticated and enterprising enough to research the law of every country to which its clientele ships its products, and effectively assess what jurisdictional risks are present - particularly in a country such as ours with its patchwork quilt of jurisdictional precedent?46

    Yet, the "should have known" standard effectively waters down the notion of purposeful conduct directed at the forum to a quasi-negligence standard, with all of its attendant vagaries. At just what volume of shipments does jurisdiction attach? How long must the period of shipments extend? The uncertainty that surrounds such questions makes the Kopke rule hard to reconcile with the fundamental purpose of due process law, which is to provide foreign parties with adequate notice of what it will take before they will be subjected to jurisdiction.47

    While there may be uncertainty surrounding the stream of commerce rule that emerges from Kopke, where it has been met, foreign parties can expect a chilly reception to any complaints of the difficulties of defending litigation in Wisconsin. Given the outcome for L'Arciere, a relatively small Italian cooperative defending itself on its own dime, other foreign companies should not expect more lenient treatment. If the supreme court was willing to subject L'Arciere to jurisdiction - even though Kopke chose not to oppose L'Arciere's contemporaneous summary judgment motion on the merits of his claim against it, since he believed that Binda alone was culpable yet likely to point to L'Arciere's empty chair at trial to deflect blame from itself if L'Arciere was dismissed solely on procedural grounds - it is evident that there does not need to be much of a resident party interest to carry the day.

    Indeed, at every turn, the Kopke majority showed itself eager to extend the jurisdictional reach of Wisconsin's courts, whether in adopting the more expansive definition of processing for purposes of the long-arm statute or in picking Justice Brennan's more permissive formulation of the stream of commerce theory. Kopke represents a new high-water mark in Wisconsin's personal jurisdiction law, although one that appears to be firmly grounded in and limited to personal injury cases - at least for the time being.


    Kopke's stream of commerce rule expands jurisdictional exposure for foreign enterprises involved in handling and distributing goods destined for Wisconsin. In addition to manufacturers of products and those in their distribution chain, companies that help to convey goods to Wisconsin - especially those with exclusive long-term contracts with producers that actively market their wares here - face a heightened risk of being hauled into Wisconsin court to answer for their conduct when injury attends those goods after their arrival here. Kopke imposes a duty on these foreign entities to investigate the destinations of the goods passing through their hands and take active steps to avoid Wisconsin unless they are prepared to defend their actions here. Those who continue to operate under the banner of "ignorance is bliss" (at least as far as being subject to jurisdiction) do so at their peril. While the doctrine of minimum contacts may not be entirely dead in Wisconsin, it has been substantially diluted, at least in personal injury cases, by a virulent stream of commerce theory of jurisdiction.


    12001 WI 99, 245 Wis. 2d 396, 629 N.W.2d 662, cert. denied sub nom. Società Cooperativa L'Arciere v. Kopke, 122 S. Ct. 808 (2002).

    2World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980).

    3See, e.g., Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985).

    4See Kopke, 2001 WI 99 at ¶ 49 (Crooks, J., dissenting).

    5326 U.S. 310 (1945).

    6Burger King, 471 U.S. at 474.

    7Kopke, 2001 WI 99 at ¶ 23 (citing Burger King, 471 U.S. at 474).

    8Burger King, 471 U.S. at 476 (quoting International Shoe, 326 U.S. at 320).

    9Id. at 477.

    10Marsh v. Farm Bureau Mut. Ins. Co., 179 Wis. 2d 42, 57, 505 N.W.2d 162 (Ct. App. 1993).

    11444 U.S. 286 (1980).

    12Id. at 297-98 (emphasis added).

    13480 U.S. 102 (1987).

    14Id. at 112.


    16 Id. at 117.

    17717 F.2d 1120 (7th Cir. 1983).

    18Id. at 1124 n.5.

    19Kopke, 2001 WI 99 at ¶ 17.

    20 48 Wis. 2d 54, 64-65, 179 N.W.2d 872 (1970).

    21Kopke, 2001 WI 99 at ¶ 23 n.9; see also id. at ¶ 49 n.1 (Crooks, J., dissenting) ("I agree with the majority's conclusion that the five-factor test set forth in Zerbel has been subsumed into the due process standards adopted by the United States Supreme Court.").

    22Id. at ¶ 30.

    23Id. at ¶ 32.

    24Id. at ¶ 36.

    25Id. at ¶ 38 (quoting Barone v. Rich Bros. Interstate Display Fireworks Co., 25 F.3d 610, 613 n.4 (8th Cir. 1994) (quoting Oswalt v. Scripto Inc., 616 F.2d 191, 200 (5th Cir. 1980))).

    26Id. at ¶ 40.

    27Id. at ¶ 46.

    28Id. at ¶ 48.

    29Id. at ¶ 49.

    30Id. at ¶ 55.

    31Id. at ¶ 61.

    32Id. at ¶ 56.

    33Id. at ¶ 57.

    34Id. at ¶ 60.


    36Id. at ¶¶ 63-64; see also Burger King, 471 U.S. at 474 ("Although it had been argued that foreseeability of causing injury in another State should be sufficient to establish such contacts there when policy considerations so require, the Court has consistently held that this kind of foreseeability is not a 'sufficient benchmark' for exercising personal jurisdiction.") (footnote omitted).

    37Logwood v. Apollo Marine Specialties, Inc., Civ. A. No. 89-4785, 1992 WL 124812, at *2 n.1 (E.D. La. June 4, 1992).

    38 Id. at *2.

    39Id. at *3.

    40 Id.

    41Id. at *4.

    42Kopke, 2001 WI 99 at ¶ 31.

    43Justice Crooks criticized the majority for glossing over this distinction. Kopke, 2001 WI 99 at ¶ 53 & n.3.

    44Cf. World-Wide Volkswagen, 444 U.S. at 296 ("If foreseeability were the criterion ... [e]very seller of chattels would in effect appoint the chattel his agent for service of process. His amenability to suit would travel with the chattel.").

    45Kopke, 2001 WI 99 at ¶ 49.

    46Compare, e.g., Kopke, 2001 WI 99, and Logwood, 1992 WL 124812, with Haley v. Champion Int'l Corp., No. 99-2256-JWL, 2000 WL 1472880 (D. Kan. April 21, 2000) and Union Pacific R. Co. v. Foxexport, Inc., No. Civ. 99-917-KI, 1999 WL 1206758 (D. Or. Dec. 14, 1999), reconsideration denied, 2000 WL 1780346 (D. Or. Dec. 5, 2000).

    47 See World-Wide Volkswagen, 444 U.S. at 297.

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