McGee v. International Life Insurance Co

McGee v. International Life Insurance Co. United States Supreme Court 355 U.S. 220, 78 S.Ct. 199 (1957) Rule of Law A state court has jurisdiction over an out-of-state company if the company has substantial connections with the state. Facts Franklin, a resident of California, purchased a life insurance policy from International, a Texas company with no offices or agents located in California. Franklin paid his premiums until his death, after which International refused to pay on the ground that Franklin had committed suicide. McGee, the beneficiary of Franklin’s life insurance policy (plaintiff) brought suit in California against International Life Insurance Co. (defendant) in California state court and McGee was awarded a judgment. Unable to collect in California, McGee filed in state court in Texas but was rebuffed there due to improper service. The United States Supreme Court granted certiorari. Issue Whether a California court has jurisdiction over a Texas insurance company when the company denies a claim of a California resident. Holding and Reasoning (Black, J.) Yes. Under precedent cases, a state court has jurisdiction over an out-of-state company if that company has substantial connections with the state. The California court has jurisdiction over International because of International’s connection with California. The life insurance contract was delivered to a California resident, and California has an interest in protecting the interests of its insured residents. It is not an undue burden on International to respond to allegations in California given the state of the national economy. The decision of the lower court is reversed and remanded. Gray v. American Radiator & Standard Sanitary Corp. Supreme Court of Illinois 22 Ill.2d 432, 176 N.E.2d 761 (1961) Rule of Law If a corporation elects to sell its products for ultimate use in another state, it is not unjust to hold the corporation answerable in those other states for any damage caused by defects in those products. Facts Phyllis Gray (plaintiff) was injured by a water heater that exploded. Gray bought the water heater in Illinois and brought suit in Illinois against Titan Valve Manufacturing Company (Titan) (defendant), the company that had negligently made the water heater’s safety valve. Titan was served with the complaint in Ohio. The company did not do business in Illinois, had no agent present in Illinois, and actually sold the safety valves to a third party in Pennsylvania where the valve was attached to the water heater. An Illinois jurisdiction statute stated that a nonresident who commits a tortious act in Illinois submits to the jurisdiction of Illinois courts. Titan filed a motion to dismiss, arguing that the statute violated due process of law by placing Titan under Illinois jurisdiction even though the company’s only contact with the state was Gray’s injury. The court granted the motion to dismiss and Gray appealed. Issue If a corporation has no other contacts in a state other than selling a product that will ultimately be used there, is that sufficient contact to hold the corporation answerable in that state for any damage caused by defects in that product? Holding and Reasoning (Klingbiel, J.) Yes. The general test for the attachment of jurisdiction to an act is whether the act has a substantial connection with the forum, and specifically whether the actor invoked the benefits and protections of the law in the state in question as part of the act. Along those lines, the court determines here that if a corporation elects to sell a product for ultimate use in a foreign state, it is not unjust to hold the corporation answerable in that foreign state for damage caused by defects in the product. American commerce has become very nationalized and it is now rare for a manufacturer to have direct dealings with consumers in other states. It is not unreasonable to say that a manufacturer, by selling its product to a third party manufacturer so it can eventually be sold nationally, has sufficient contacts with each state where the final product is sold to be brought into court there. Such is the case here with Titan. It sold the safety valve to a company in Pennsylvania, only so a final product incorporating the valve could eventually be sold nationally—in this case, specifically in Illinois. The sale of the safety valve thus gives Titan sufficient contacts with Illinois to be brought into court there now that the valve has caused injury there. The Illinois statute therefore does not violate Titan’s right to due process. The lower court is reversed and the case is remanded.