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Supreme Court Issues Two Significant Personal Jurisdiction Decisions
Jeremy D. Kernodle, Ryan Paulsen
The United States Supreme Court recently issued two important opinions clarifying when a court may exercise personal jurisdiction over a foreign defendant.
A unanimous court held in Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76 (June 27, 2011), that a court may exercise general jurisdiction over a foreign defendant only where the defendant’s contacts in the forum state are so “continuous and systematic” as to render the defendant essentially “at home” there. Importantly, the court held that merely placing a product in the “stream of commerce” with the expectation that the product might be bought or sold in the forum state falls “far short” of the continuous and systematic contacts necessary to establish general jurisdiction.
In J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343 (June 27, 2011), a majority agreed that a court may not exercise specific jurisdiction over a foreign defendant unless the defendant directed some “activity” at the forum state and the claims arise out of that activity. Although the Court was fractured in its reasoning, a majority of the justices agreed that a foreign defendant whose product was distributed throughout the United States and ended up in New Jersey, where it caused injury, was not subject to jurisdiction in New Jersey. It was not enough that the manufacturer knew or should have known that its product “might” be sold in New Jersey. If that were the rule, then any manufacturer selling its products through a national distribution system would be subject to jurisdiction in any state where the product caused injury.
1. Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76 (June 27, 2011).
Background. Julian Brown and Matthew Helms, two teenagers from North Carolina, were fatally injured when their bus overturned on a road outside of Paris, France. Their parents filed suit in North Carolina against The Goodyear Tire and Rubber Company and its indirect subsidiaries based in Luxembourg, Turkey, and France (the “subsidiaries”), alleging the accident was caused by negligence in the design and production of the bus tires. The subsidiaries moved to dismiss for lack of personal jurisdiction, but the trial court denied the motion and the intermediate state court of appeals affirmed. The North Carolina courts held that the subsidiaries put their tires into “the stream of commerce,” and some of those tires ended up in North Carolina. This was enough, according to those courts, for a court in North Carolina to exercise personal jurisdiction over the subsidiaries regarding the conduct that occurred abroad.
Decision. A unanimous Supreme Court reversed, holding that the subsidiaries’ connections with North Carolina were too limited to support an exercise of general jurisdiction. The court held that merely placing a product in the stream of commerce without limiting its ability to be sold in the forum state is insufficient to establish general jurisdiction. “Such a connection does not establish the ‘continuous and systematic’ affiliation necessary to empower North Carolina courts to entertain claims unrelated to the foreign corporation’s contacts with the State.” Instead, to establish general jurisdiction over a foreign defendant, a plaintiff must show that the defendant purposefully conducts operations that are so substantial in the forum state that the corporation can be considered “at home” there.
2. J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343 (June 27, 2011).
Background. Robert Nicastro was injured at his workplace by an industrial metal shearing machine manufactured by an English company, J. McIntyre Machinery, Ltd. Nicastro brought a products liability claim against the company in New Jersey state court, the site of the injury. J. McIntyre argued that the state court lacked personal jurisdiction because the product was manufactured abroad and J. McIntyre did not sell the product directly to the consumer in New Jersey. Although J. McIntyre had engaged a distributor to sell its products throughout the United States and its employees regularly attended U.S. trade conventions, the company claimed that these contacts were insufficient to establish personal jurisdiction.
The New Jersey Supreme Court rejected that argument. Relying on a plurality opinion by Justice Brennan in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), the court held that under the “stream of commerce” doctrine, so long as a foreign manufacturer knew or should have known that its products “might” be distributed nationwide, New Jersey state courts could exercise specific jurisdiction over products liability actions against the manufacturer.
Decision. The Supreme Court reversed the New Jersey Supreme Court, but fractured in its reasoning. Justice Kennedy, writing for a plurality of four justices, rejected Justice Brennan’s plurality opinion in Asahi. Justice Kennedy held that a court may exercise specific jurisdiction over a foreign defendant only where the defendant “purposefully avails itself of the privilege of conducting activities within the forum State.” Thus, merely placing a product in the stream of commerce – even where the product “might” end up in the forum State – is insufficient to establish specific jurisdiction. Instead, a defendant’s distribution of its product “permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum.”
Justice Breyer issued a concurring opinion, joined by Justice Alito. Although Justice Breyer agreed that J. McIntyre’s contacts with New Jersey were insufficient to establish specific jurisdiction, he did not want to adopt the “plurality’s seemingly strict no-jurisdiction rule.” Because the case could be decided by reference to prior precedent, Justice Breyer argued that it was unwise to use this case to announce a rule of broad application.
Justice Ginsburg, joined by Justices Sotomayor and Kagan, dissented, explaining that J. McIntyre purposefully availed itself of the United States market and that it would “undermine fundamental fairness” to insulate such foreign manufacturers from accountability when they market to the United States.
Implications. Although the failure of the Court to adopt a single rule will likely limit J. McIntyre Machinery’s impact, the decision will almost certainly make it more difficult to establish specific jurisdiction on the basis of the stream of commerce doctrine.
For more information, please visit the Business Litigation page of the Haynes and Boone, LLP website or contact one of the attorneys below.You may also view the alert in the PDF linked below.
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