N.J. lawsuit against Delaware dealer won't be dismissed on jurisdiction

Publish Date: 
Aug 9, 2013
By Holly J. Wagner

BEAR, Del. - A Delaware dealer will have to contest a product liability lawsuit in the plaintiff's home state of New Jersey because the dealer advertised and sold to so many New Jersey customers in the past, a federal judge has ruled.

Powersports East had moved to have a customer lawsuit (see below) dismissed on jurisdiction. However, the judge ruled against the motion, pursuaded by a review of the dealership's marketing efforts courting New Jersey residents to buy in neighboring Delaware in part due to the fact that Delaware has no state sales tax.

The plaintiffs stated that they made their decision to buy from the dealership (referred to in the suit as East Coast Cycles, the company that owns Powersports East) partly because they would not have to pay a sales tax.

In weighing the arguments, U.S. District Judge Jerome Simandle looked at how the dealership marketed to New Jersey customers through channels that included social media and events.

“East Coast’s YouTube account contained a video promoting a 'Tax Free Delaware' to entice customers from neighboring jurisdictions that charge sales tax, including New Jersey, to purchase vehicles in Delaware,” Simandle wrote. “East Coast’s Facebook page included a promotion offering free tickets to the 35th Annual Kawasaki Race of Champions in Englishtown, New Jersey, for correctly answering a trivia question…. East Coast’s Facebook page also advertised an annual motorcycle ride along the New Jersey shore that originated in New Jersey. Additionally, East Coast uses its website to sign up customers for an electronic newsletter.” 

Other factors in the judge's decision included the dealership’s offers to pick up vehicles from New Jersey customers for service or to service them in New Jersey, and the actual volume of Powersports East sales to New Jersey customers, both in numbers and as a percentage of total sales.

He noted that the store’s out-of-state sales are almost equal to its sales in Delaware.

"New Jersey customers have purchased more than 1,900 vehicles, or 12 percent of all vehicles sold at Powersports East, which account for more than $10.3 million in revenue from New Jersey residents over the past decade," the judge wrote. "These numbers are substantial. East Coast certainly can be said to benefit from the tax laws in New Jersey and Delaware that encourage New Jersey consumers to buy big-ticket items like motorcycles in Delaware rather than in New Jersey.

"These contacts, viewed cumulatively with evidence of East Coast's Internet sales, which are direct contracts with New Jersey customers, advertising, and targeting of New Jersey customers on its website, show more than minimum contacts between East Coast and New Jersey" to make the venue appropriate, the judge wrote.  (continued)