On June 27, 2011, the Supreme Court issued a pair of important
decisions limiting state courts' personal jurisdiction over
out-of-state defendants, Goodyear Dunlop Tires Operations, S.A.
v. Brown, No. 10-76 (U.S. June 27, 2011), and J. McIntyre
Machinery, Ltd. v. Nicastro, No. 09-1343 (U.S. June 27, 2011).
The Court addressed the two basic categories of personal
jurisdiction—general jurisdiction and specific
jurisdiction—and endorsed narrower limits on both than
have been applied by many lower courts. The general jurisdiction
decision, Goodyear, significantly clarified what has been
a murky legal standard, and did so in a way that presents
significant new opportunities for corporations to avoid
jurisdiction in improper forums. In the specific jurisdiction case,
McIntyre, the Court's inability to agree on a majority
opinion injected additional confusion into an already unsettled
area.
The first decision, Goodyear, addressed
"general" personal jurisdiction, which permits a state to
assert all-encompassing jurisdiction over any and all suits against
a defendant—regardless of whether the suit relates to the
defendant's contacts with the state—when the
defendant has sufficiently significant contacts with the state. The
Court's prior cases were less than clear about how significant
those contacts had to be, and the most frequently invoked standard
in the lower courts has been one that requires "continuous and
systematic contacts" with the state—a phrase that
gives no guidance as to the type, nature, or extent of the
necessary contacts. Many lower courts found this standard satisfied
as long as the defendant was in some sense "doing
business" in the state on an ongoing basis, even if the amount
of business was relatively insubstantial in comparison to the
defendant's operations as a whole. Goodyear calls many
of these cases into question by suggesting a much narrower scope
for general jurisdiction: the Court emphasized that general
jurisdiction over a corporation is permissible only in a state
"in which the corporation is fairly regarded as at home,"
and indicated that the paradigm is the state of incorporation or
principal place of business.
In Goodyear, North Carolina teenagers were killed in a bus
accident while traveling in France. Their parents brought a
wrongful-death suit in North Carolina state court against, among
others, three overseas Goodyear affiliates, including the one who
had manufactured the bus's tires. Those affiliates manufactured
and distributed tires primarily for Europe and Asia, and the tire
at issue had never been distributed in North Carolina.
Nevertheless, the North Carolina Court of Appeals exercised general
jurisdiction over the Goodyear affiliates on the ground that a
relatively small but continuous flow of other tires they made or
distributed had reached North Carolina through the "stream of
commerce"—i.e., they had been sold to other
entities, which in turn distributed them in North Carolina.
Jones Day represented the Goodyear affiliates, who were the
petitioners in the Supreme Court. That Court reversed, in a
unanimous opinion by Justice Ginsburg that defined general
jurisdiction in terms significantly narrower than the version that
has been applied in many lower courts. The Court emphasized in
three separate places that general jurisdiction was reserved for a
state in which the defendant was at "home," including a
key passage suggesting that the relevant state for a corporation
should be "equivalent" to the state of domicile for an
individual: "For an individual, the paradigm forum for the
exercise of general jurisdiction is the individual's domicile;
for a corporation, it is an equivalent place, one in which the
corporation is fairly regarded as at home." Giving further
content to this notion, the Court cited an academic article
"identifying domicile, place of incorporation, and principal
place of business as 'paradigm' bases for the exercise of
general jurisdiction," and referred to Perkins v. Benguet
Consol. Mining Co., 342 U. S. 437 (1952)—a case in
which the corporation had its principal place of business in the
state—as the "textbook" case for general
jurisdiction.
The Court thus rejected the state court's "stream of
commerce" theory for general jurisdiction, noting with
disapproval that the lower court's "sprawling view"
would allow "any substantial manufacturer or seller of goods
[to] be amenable to suit, on any claim for relief, wherever its
products are distributed." And the Court expressly rejected
the notion that mere sales of a corporation's products could
support general jurisdiction, stating flatly that "even
regularly occurring sales of a product in a State do not justify
the exercise of jurisdiction over a claim unrelated to those
sales."
Although Goodyear does not expressly criticize any lower
court cases other than the North Carolina decision under review,
the Court's definition of general jurisdiction as reserved for
"home" states unmistakably calls into question the more
expansive notions of general jurisdiction that have been applied in
many lower courts. It remains to be seen whether the lower courts
will fully effectuate Goodyear's suggestion that
general jurisdiction should be limited to a corporation's state
of incorporation or principal place of business. And it is likewise
an open question whether registering to do business in a state (and
appointing an agent for service of process) will be treated as a
valid consent to general jurisdiction—a question on which
there is a split of lower court authority. But, at a minimum,
Goodyear presents significant new obstacles to
forum-shopping plaintiffs and significant new opportunities for
defendants to resist jurisdiction in circumstances where that would
not have been viable under prior law.
The second decision, McIntyre, addressed
"specific" personal jurisdiction, which applies when the
suit arises from or relates to the defendant's contacts with
the state. In particular, McIntyre dealt with the
"stream of commerce" variant of specific jurisdiction, in
which a manufacturer has no direct contact with the forum state,
but its products are sold there by a third party distributor and
cause injury in the state. In an earlier decision, Asahi Metal
Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S.
102 (1987), the Court split evenly over the circumstances in which
such an out-of-state manufacturer could be sued in the state where
its products caused injury. After more than two decades without
revisiting the issue, the Court appeared poised, in
McIntyre, to resolve the disagreement in Asahi.
In a sharply divided opinion, however, the Court failed to do so.
Instead, what emerged was a narrow holding—that specific
jurisdiction does not exist over a manufacturer when the
distributor has made only a single sale in the state, even if that
sale leads to an in-state injury involving the manufacturer's
product. The Court left all other questions open, deepening the
confusion in an already confused area.
In McIntyre, the defendant was an English manufacturer of
metal-shearing machinery. It distributed its products into the
United States through a U.S. distributor, which sold at least one
machine to a New Jersey company. An employee of that company, the
plaintiff, was injured while working on the machine and brought a
product-liability suit against the manufacturer. The New Jersey
Supreme Court found specific jurisdiction in New Jersey because (1)
the injury occurred there; (2) the defendant had distributed its
products through a nationwide distribution system; and (3) the
defendant took no steps to prevent its products from reaching New
Jersey. The U.S. Supreme Court reversed.
Writing for a plurality that included Chief Justice Roberts and
Justices Scalia and Thomas, Justice Kennedy stated that, in cases
involving products moving through the stream of commerce, specific
jurisdiction is proper only where "the defendant can be said
to have targeted the forum." Applying that standard, the
plurality found that the defendant had not targeted New Jersey by
establishing a nationwide distribution system, as that fact showed
only "an intent to serve the U.S. market."
In the controlling opinion, Justice Breyer, joined by Justice
Alito, agreed that specific jurisdiction was lacking. Justice
Breyer concluded "that a single sale of a product in a State
does not constitute an adequate basis for asserting jurisdiction
over an out-of-state defendant, even if that defendant places his
goods in the stream of commerce, fully aware (and hoping) that such
a sale will take place." Justice Breyer, however, refused to
"go further," finding the case an "unsuitable
vehicle for making broad pronouncements that refashion basic
jurisdictional rules." On one hand, he was concerned with how
the plurality opinion would apply in different circumstances, such
as when a company sells products from a web site, and expressed
doubt about the plurality's strict rule requiring that the
defendant specifically targeted a particular state. On the other,
he expressed concern that the New Jersey Supreme Court's
decision would unfairly expand specific jurisdiction to reach even
a small manufacturer who sells goods to a global distributor,
knowing that the distributor might resell them anywhere in the
world.
Justice Ginsburg, in a dissent joined by Justices Sotomayor and
Kagan, suggested that a company should not be able to avoid
specific jurisdiction with the simple expedient of using "a
U.S. distributor to ship its machines state-side." Instead,
she would have held that a manufacturer who engaged a U.S.
distributor "to promote and sell its machines in the United
States, 'purposefully availed itself' of the United States
market nationwide, not a market in a single State or a discrete
collection of States." Accordingly, she would have found that
specific jurisdiction was proper in "all States in which [the
manufacturer's] products were sold by its exclusive
distributor."
The net result of McIntyre is that there are four votes on
the Supreme Court for a strict requirement that the defendant has
specifically targeted a particular state, and a narrower
controlling opinion by Justice Breyer that proposes no general
standard to govern stream of commerce cases. In short, the
jurisdictional principles governing stream of commerce cases have
emerged—against all odds—even murkier than they
were under Asahi.
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