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By John L. Watkins, Partner, Barnes & Thornburg LLP
On June 27, 2011, the United States
Supreme Court issued two decisions that limit the ability of U.S. courts to
assert jurisdiction against foreign manufacturers if their contacts with the
state in which suit is brought are limited. Although these cases involve the
highly mind-numbing procedural area of personal jurisdiction (probably my
least favorite subject as first year law student many years ago), they are
very important, so please bear with me through the discussion!
In Goodyear Dunlop Tires Operations, S.A. v. Brown, [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] the Supreme Court unanimously agreed that the North
Carolina courts improperly asserted jurisdiction over foreign subsidiaries of a
U.S. corporation. The claim was based on an accident in which two 13-year old
boys from North Carolina were killed in an accident outside of Paris, France,
allegedly due to a defective tire manufactured in Turkey by a foreign
subsidiary of Goodyear Tire and Rubber Company, an Ohio corporation.
The subsidiaries did not do business in North Carolina and the tires in
question were not actively marketed in North Carolina, although a relatively
small number of tires found their way to North Carolina through special orders.
As a general rule of federal due process (Constitutional protection), the
Supreme Court requires that a defendant have sufficient "minimum
contacts" with the forum state (the state where suit is brought) to
comport with "traditional notions of fair play and substantial
justice." More recent Supreme Court decisions have led to the recognizing
the concepts of "general jurisdiction" and "specific
For general jurisdiction, the company's contacts with the forum must be so
"continuous and systematic" that the company is effectively at home
in the forum. If general jurisdiction is established, the company is
potentially subject to a suit on any matter in the forum.
For specific jurisdiction, the jurisdictional facts must relate to the
issues con connected with the controversy. For example, the fact that an
accident occurred in the forum would be relevant to -- although not
determinative -- regarding the exercise of specific jurisdiction.
In Goodyear, the North Carolina courts recognized that specific
jurisdiction did not exist because the accident was unrelated to North Carolina
and the tires were manufactured abroad. Nevertheless, the North Carolina Courts
exercised general jurisdiction over the case, finding the fact that the
subsidiaries put other tires in the "stream of commerce" that reached
North Carolina and without any limitation on the tires being sold in North
It did not take the Supreme Court long to reject this reasoning. In an
opinion written by Justice Ginsburg (a member of the liberal wing of the
Court), the Court explained that the "stream of commerce" analysis is
generally relevant only to the exercise of specific jurisdiction, such as when
a manufacturer places products in the stream of commerce that result in an
accident occurring the forum. Merely placing products in the stream of
commerce, however, does not establish the continuous and systematic contacts
necessary to establish general jurisdiction. Thus, the Court reversed the North
Carolina court's exercise of jurisdiction.
In J. McIntyre Machinery, Ltd. v. Nicastro, [enhanced version / unenhanced version ]
the Court found that the New Jersey courts improperly exercised jurisdiction
over an English machinery supplier of shears used in the scrap metal industry.
The plaintiff sustained severe injuries while using a machine manufactured by
the supplier. The accident occurred in New Jersey.
In a fractured opinion (with four Justices in the plurality opinion, two
concurring, and three dissenting), the Court ruled that the New Jersey courts
lacked jurisdiction to hear the matter. In this case, the Court was dealing
with whether the New Jersey courts could assert specific jurisdiction
over the case.
The supplier did not target New Jersey for sales. The supplier had an
independent U.S. distributor, but its goal was to sell in the U.S. generally,
not New Jersey in particular. The supplier also attended trade shows in the
U.S., but not in New Jersey. There was evidence suggesting (although it appeared
disputed) that as many as four of the supplier's machines were located in New
The plurality found that the transmission of goods into a jurisdiction
permits the exercise of jurisdiction only where the defendant is said to have
targeted, or purposefully availed itself of, the forum. The mere fact that the
defendant is aware that its product may enter a state is not enough.
The concurring Justices agreed with the result, but cautioned against making
general rules based on the limited facts of the case. The concurring opinion
specifically noted that the case did not involve modern sales methods, such as
The results in Goodyear and McIntyre clearly change the
landscape of the exercise of personal jurisdiction. They make it more difficult
for U.S. plaintiffs to sue international suppliers in the U.S.
The result in Goodyear is not surprising. It will limit the ability
of plaintiffs to bring suit in the U.S. for accidents and injuries that
occurred elsewhere unless the defendant meets the somewhat demanding standards
for establishing general jurisdiction.
The result in McIntyre was, at least to me, surprising and is not
what I would have predicted before the opinion was released. It had previously
become almost conventional wisdom that if a manufacturer placed products in the
stream of commerce and that product caused injury in a state, a court would
probably find a way (as the New Jersey courts did here) to subject the
manufacturer to suit in the state where the injury occurred.
McIntyre changes the landscape and will provide many international
suppliers with arguments for avoiding suit in particular states, or perhaps
even in the U.S. generally. For domestic suppliers, McIntyre will
provide arguments for avoiding suit in states in which they have only
attenuated business connections.
The precise effect of McIntyre, however, remains to be seen. Because there
is no majority opinion, its influence remains to be seen. It does seem,
however, that six of the nine Justices have agreed that merely placing a
product in the stream of commerce with knowledge that it might reach a forum,
and without more, is not enough to meet the "minimum contact"
requirements to establish specific jurisdiction.
How much more is required to establish specific jurisdiction will
undoubtedly be hotly contested for many years to come.
John L. Watkins is a partner with Barnes &
Thornburg LLP in Atlanta, Georgia. Mr. Watkins practices primarily in the area
of litigation, with an emphasis on insurance coverage matters and matters
involving trade secrets and confidential information. With respect to insurance
coverage, Mr. Watkins currently represents policyholders in coverage and bad
faith litigation with insurers. In the past, Mr. Watkins has represented
insurers in such claims. Mr. Watkins has been involved in coverage matters
involving losses ranging several hundred thousand dollars to several hundred
million dollars in Georgia and many other jurisdictions. Mr. Watkins received
his law degree from the University of Georgia, summa cum laude, and has
practiced for over twenty-five years.
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