On May 16, 2007, the Bankruptcy Judge Joan A. Lloyd issued her decision in the case of In re Thermoview Industries, Inc., ___ B.R. ___, 2007 WL 1447855 (Bkrtcy.W.D.Ky.)(Lloyd, J.). This case involved a situation in which the Chapter 11 Trustee brought a preference action against a Canadian corporation. The court held that it lacked specific personal jurisdiction over the the Canadian creditor and dismissed the adversary proceeding.
The Canadian corporation had it principal place of business in Canada. It did not do business in the U.S. nor was not registered to do business in the U.S. The Debtors purchased items from the Creditor FOB the plant in Canada. The Trustee attempted to serve the Canadian Creditor by mail and further measures in compliance with the Hague Convention's requirements. The Trustee contended that the fact that the Debtor's purchased products FOB the creditor's Canadian plan was sufficient to confer specific personal jurisdiction. The Trustee did not contend that there was "continuous and systematic" contacts with the forum as is required for general personal jurisdiction.
The court reviewed that in order to establish the existence of specific jurisdiction, the following three part test must be met: 1. the defendant must purposely avail himself of the privilege of acting in the forum state or cause a consequence in the forum state, 2. the cause of action must arise from the defendant's activities there, and 3. the acts of the defendant or consequences must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. Southern Machines Co., Inc. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968). All three elements must be met to invoke personal jurisdiction. LAK, Inc. v. Deercreek Enterprises, 885 F.2d, 1293, 1303 (6th Cir.1989).
As to meeting element number one, the court noted the Sixth Circuit Court of Appeal's preference for the "stream of commerce plus" approach in analyzing whether a defendant purposely avails itself of the privilege of acting in the forum state. Under this theory, the placement of a product into the stream of commerce, without more, is not an act of the defendant purposely directed toward the forum State.
The creditor sought dismissal of the complain based on lack of personal jurisdiction and insufficient service of process. The court noted that the record before the court showed that creditor was not registered to do business in the U.S. and that it in fact did not do business in the U.S. The court found merit in the creditor's arguments and dismissed the preference adversary proceeding.
