V&E Litigation Updates E-communication, June 28, 2011
When a court has general jurisdiction over a non-resident corporation, that court may hear “any and all claims” against that corporation. On June 27, 2011, after nearly 30 years of silence on the issue, the United States Supreme Court further clarified the standard for general jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown.1 For the first time, the Court held 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.”2 The Goodyear decision makes clear that the minimum contacts test for general jurisdiction looks not only at the quantity of forum contacts, but more significantly, at the qualitative nature of those contacts. Comparing a corporation to an individual, the Court emphasized general jurisdiction over a corporation can be premised only on contacts that create “connections” and “affiliations” akin to those an individual has to his home state.
Two young boys, permanent residents of North Carolina, were involved in a fatal bus accident in Paris, France. Their parents alleged a defective tire caused the accident and sued Goodyear Tire and Rubber Company, an Ohio corporation, and three of its foreign subsidiaries, colloquially called Goodyear Luxembourg, Goodyear Turkey, and Goodyear France. Goodyear Turkey manufactured the tire involved in the accident.
The plaintiffs argued the Goodyear foreign subsidiaries were subject to general jurisdiction in North Carolina because they caused their tires to reach North Carolina through the “stream of commerce,” which created continuous and systematic contacts with North Carolina. The trial court denied the foreign subsidiaries’ motions to dismiss for lack of personal jurisdiction. The North Carolina Court of Appeals affirmed, emphasizing that “thousands of tires manufactured by each of the Defendants were distributed in North Carolina as the result of a highly organized distribution process that involved Defendants and other Goodyear affiliates.”3
The U.S. Supreme Court unanimously reversed the North Carolina Court of Appeals’ decision and held the Goodyear foreign subsidiaries were not subject to general jurisdiction in North Carolina. Three points in the opinion stand out.
First, the Court gave a concrete explanation for the abstract concept of “continuous and systematic contacts,” the standard for general jurisdiction for the last 60 years, as applied to a corporation. A corporation is subject to general jurisdiction in a state where it is “fairly regarded as at home.”4 Based on their relatively paltry contacts with the state, the Court concluded the Goodyear foreign subsidiaries “are in no sense at home in North Carolina.”5
Second, the Court confirmed the stream of commerce doctrine is a theory of specific jurisdiction only.6 According to the Court, the North Carolina Court of Appeals “elided the essential difference between case-specific and all-purpose (general) jurisdiction” and inappropriately applied the stream of commerce test to general jurisdiction. The stream of commerce theory is irrelevant to general jurisdiction.
Third, and perhaps most importantly, the Court held that even regularly occurring sales of products in a state, standing alone, do not subject the defendant to general jurisdiction in that state.7 The holding is the counterpart to the one in Helicopteros Nacionales de Colombia, S.A. v. Hall that “mere purchases, even if occurring at regular intervals,” do not support general jurisdiction.8 The importance of the Court’s use of “mere” and “alone” cannot be overstated. While purchases and sales alone may not weigh heavily into the general jurisdiction analysis, a non-U.S. company should ensure it is not engaging in other activity in the forum that will push the balance in favor of jurisdiction.
Together with Helicopteros, Goodyear provides welcome guidance to foreign companies who want to do business with the United States. Now better able to predict the states where they may be subject to jurisdiction, prudent companies can educate themselves on the laws of those states and make informed decisions whether to do business in those states. With proper planning, companies should be able to take advantage of the business benefits of the U.S. market without subjecting themselves to the risk of U.S. litigation based on non-U.S. operations.
For more information, please contact Vinson & Elkins lawyers Phillip Dye, Jennifer Davidow, or Nicholas Shum. Visit our website to learn more about V&E's Litigation practice.
1 No. 10-76, 560 U.S. __ (June 27, 2011) (slip op.)
2 Slip op. at 14 n.6.
3 Brown v. Meter, 199 N.C. App. 50, 68, 681 S.E.2d 382, 395 (N.C. Ct. App. 2009).
4 Slip op. at 7.
5 Id. at 13.
7 Id. at 14 n.6.
8 466 U.S. 408, 418 (1984).