Written by Peter CarterApril 27, 2017
In a dispute over a design defect claim against its domestic subsidiary, a US Court has ruled that California courts cannot exercise jurisdiction over foreign corporation Yamaha Motor Co. Ltd.
A group of twenty plaintiffs claimed defective boat motors violated federal and state warranty laws and state consumer protection laws. However, the court held that the plaintiffs’ complaint did not allege sufficient facts to establish general or specific jurisdiction over Yamaha.
The court also dismissed the complaint against the subsidiary for failure to sufficiently allege consumer fraud and unreasonable safety hazard claims. (Williams v. Yamaha Motor Co. Ltd., 2017 WL 1101095 (9th Cir. Mar. 24, 2017).)
The claim stated that the Japanese designed and manufactured outboard motors suffered manufacturing faults that resulted in corrosion in the dry exhaust system, ultimately leading to engine fail before their expected hours limitation was reached. Due to the average hours the motors were in use, the problem was not apparent until the 3 year warranty had expired.
Yamaha Motor Corp., U.S.A., a Yamaha owned subsidiary, had imported and marketed the motors in California. Because of this, Yamaha was granted a motion to dismiss. Ruled on the grounds that the court lacked jurisdiction over the defendant.
The court ruled that Yamaha did not meet the general jurisdiction requirements that were previously tested in Daimler AG v. Bauman (134 S. Ct. 746 (2014) as Yamaha is an incorporated business in Japan and does not have any employees nor any office spaces in California, as well as their worldwide distributions.
The court concluded that Yamaha was not at home in the state of California and therefore cannot exercise jurisdiction over the foreign corporation.
The court also granted the subsidiary’s motion to dismiss the state consumer fraud claims, and the plaintiffs appealed.
The plaintiffs also argued that Yamaha’s domestic subsidiary was an alter ego, however, with no prima facie evidence this was also dismissed.
The plaintiffs did present sufficient facts supporting the subsidiary was aware of the engine faults as they created a customer service centre in 2001 to handle complaints. However the plaintiffs failed to prove the corrosion was an unreasonable safety hazard as no such issues had arisen thus far and no injuries recorded, and again, their claim was dismissed.