On Oct. 13, Mississippi's highest court ruled that a South Korean company, LG Chem Ltd., which manufactured a battery that powered a vaping device, could be sued in Mississippi, despite that company having no physical presence in Mississippi and not being registered to do business in the state.

As the medical cannabis market in Mississippi nears its grand opening, and as Alabama begins to review medical cannabis business applications, the opinion demonstrates that any entity connected to the chain of commerce in these new markets could face litigation — despite its perceived remote contacts to these states.

The case — Dilworth v. LG Chem — is based on allegations that Melissa Dilworth received serious burns after the battery inside her vaping device exploded while she was out walking her dog.

In addition to LG Chem, the plaintiff sued the vape store, the store's suppliers and the manufacturer of the vaping device.

LG Chem sought to dismiss the claims against it on personal jurisdiction grounds, arguing that the batteries it manufactures are not made for individual, stand-alone sale in Mississippi but are instead intended to be used in specific applications by sophisticated companies.

The Mississippi Supreme Court rejected LG Chem's arguments, first finding that the South Korean company purposefully availed itself of the lithium-ion battery market in Mississippi because it placed its products in the stream of commerce knowing they would be sold — whether stand-alone or as a part of another product — in Mississippi.

That the battery reached consumers exclusively through third-party distributors unauthorized to sell the products for individual use was immaterial.

Likewise of no consequence to the jurisdictional question was whether or not the alleged injuries resulted from an unintended use of the product. That issue, the court held, went to
the merits of the case and not the threshold jurisdictional question.

Finally, the court found that Mississippi's interest in adjudicating the dispute was high because a Mississippi resident was injured in Mississippi by a product purchased in
Mississippi.

The Mississippi Supreme Court Sets Precedent

The Mississippi Supreme Court relied on recent U.S. Supreme Court personal jurisdiction precedent to keep LG Chem in Mississippi's court systems.

An adage of federalism is that opinions handed down by the U.S. Supreme Court are binding on individual states, but with a caveat: A state supreme court may construe its own constitution or statutes to impose more restrictions on the exercise of personal jurisdiction within its state's borders.[1]

In Dilworth, Mississippi chose to follow the more expansive and broader stream of commerce test adopted by the Supreme Court in 2021 in its Ford Motor Co. v. Montana Eighth Judicial District Court decision.

That case related to two automobile accident claims: one arising after a Montana resident was killed when a Ford Explorer malfunctioned, and the other after a plaintiff suffered injuries in Minnesota because of a defect in a vehicle manufactured by Ford.

Neither plaintiff purchased the subject vehicles in Montana or Minnesota. Ford sought dismissal on personal jurisdictional grounds, arguing that the vehicles were not designed, manufactured or sold in the state where the accidents occurred.

The Supreme Court disagreed, applying the standard personal jurisdiction test required that the defendant must have (1) contacts within the state; (2) the claim must arise out of those contacts; and (3) the exercise of personal jurisdiction must be reasonable.

The court held that Ford had contacts because of its business in the forum. That business, including billboards, commercials and advertisements, sufficiently related to each plaintiff's
injuries.

The decision turned on the "arises out of" element. The court found that this second element could be met if the claim "relat[ed] to" the defendant's business in the forum.

Was this fair? That is debatable, but the court found that it was reasonable. When a company "purposefully avails itself of the privileges of conducting" business in a forum, it should expect to be hauled into court in that jurisdiction.

LG Chem's Defense and Jurisdictional Challenges

LG Chem's jurisdictional challenges have had varying success across the country.

Georgia and Tennessee, like Mississippi, rejected the company's jurisdictional oppositions in similar explosive battery cases and on similar grounds as Mississippi.

Yet in LG Chem v. Superior Court of San Diego County, the Court of Appeal of California, Fourth Appellate District, found in June that the exercise of specific personal jurisdiction by LG Chem was "not consistent with due process."[2]

Like Mississippi, the California appellate court agreed that LG Chem purposefully availed itself of California's jurisdiction even though the market for LG Chem batteries was not for stand-alone, replaceable batteries.

Unlike Mississippi, however, the California court held that the minimum contacts test was not ultimately met because the plaintiff's claims did not arise out of LG Chem's contacts with California — LG Chem's sales in California were in the automobile market, not the vape pen market.

Earlier this month, in LG Chem America Inc. v. Zapata, the Texas Court of Appeals for the 14th District dismissed claims against LG Chem for lack of personal jurisdiction in an exploding battery issue, applying a similar rationale as the California appellate court.[3]

What the Dilworth Decision Means for Vape Device Manufacturers and Goods Sold in the U.S.

The Dilworth decision is another reminder that an entity that may not physically operate a business in a state — or even in the United States — may nonetheless be forced to litigate a case against it in the state where its products are sold.

Why this is pertinent to businesses engaged in the cannabis industry in Mississippi or other states should be evident. Medical cannabis products will soon be sold to qualified patients in
Mississippi, and well over half of other states currently sell cannabis products. Those products come in various forms, including vaping devices similar to the one at issue in Dilworth.

Foreign companies that design, test or manufacture components of those products, or that perform similar functions related to component parts of equipment used to grow or process cannabis, must be aware that even though they don't specifically market their particular component parts to a state's residents, simply placing them in a stream of commerce that finds its way to the particular state can have serious implications.

The notion that such a company is adequately outside that state's jurisdiction under these circumstances should, well, go up in smoke.

Practical Takeaways

So, what are some practical takeaways from the seemingly inconsistent application of the personal jurisdiction jurisprudence in these exploding battery cases?

• For one, a company must know that it can be sued in any state where its products are ultimately sold. In other words: Businesses beware. This recognition should cause these companies to closely evaluate several components of its organization, such as the liability insurance coverage they have in place to ensure that coverage exists in every state where the products are sold.
• Similarly, it would be wise for these companies to button up their risk transfer provisions in contracts with other parties in the chain of commerce. To the extent possible, a protective indemnity and hold-harmless provision could prove critical if a foreign entity faces major exposure in a jurisdiction known for high verdicts.
• The Mississippi Supreme Court decision may be limited in legal effect to the borders of Mississippi, but it portends potentially seismic change in other jurisdictions and should be noted by any business that intends to ship its products nationwide.

Republished with permission. This article, "Miss. Ruling Deepens Jurisdiction Split in Vape Battery Cases," was published by Law360 on November 17, 2022.

[1] Jeffrey S. Sutton, 51 Imperfect Solutions: States and The Making of American Constitutional Law, 132 Harv. L. Rev. 811 (2018).

[2] LG Chem, Ltd. v. Superior Ct. of San Diego Cnty., 80 Cal. App. 5th 348, 295 Cal. Rptr. 3d 661 (2022), review denied (Oct. 12, 2022).

[3] LG Chem Am. Inc. v. Zapata, Tex. App., 14th Dist., No. 14-21-00695-CV, 11/1/22.