Wednesday, December 17, 2008, 3:33 PM

COA: No Personal Jurisdiction Over Korean Companies

Yesterday the NC Court of Appeals (COA) held that the trial court erred in exercising personal jurisdiction over two Korean companies. The case is Cambridge Homes of N.C. Ltd. P'Ship v. Hyundai Construction, Inc. It's an important personal jurisdiction case for those who produce component parts or compounds incorporated into products that are sold in NC.

This products case arose from allegedly defective vinyl siding installed on homes that plaintiff constructed in NC. Personal jurisdiction was not contested by the company that provided and installed the siding (it's a NC company) or the company (a Korean company) that manufactured the siding and sold it to the installer. In short, this appeal wasn't about the manufacturer or installer of the siding.

Instead, this appeal concerned two related Korean companies (we'll call them K-1 and K-2) that created and provided chemical compounds that the Korean manufacturer used to make the siding. Specifically, K-1 created resins and sold them to K-2; K-2 then used the resins in chemical compounds that it sold in Korea to the Korean manufacturer. The manufacturer then used the compounds to make the siding.

The COA held that jurisdiction couldn't be exercised over K-1 and K-2 without violating due process. K-1 and K-2 didn't solicit any business in NC or contract with any NC resident or distributor. They didn't purposefully inject their products into commerce in NC: K-1 didn't even know that the chemical resins it sold to K-2 would later be used to manufacture the siding; K-2 knew its compounds would be used to manufacture siding but it didn't know the siding would be sold outside Korea.

The COA deemed it immaterial that K-2 traveled to NC to analyze or repair the siding after problems were reported by plaintiff. Likewise, the COA deemed it immaterial that K-2 shipped products to NC after the complaint was served, because those activities occurred after the alleged injury and after the complaint was filed.

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