Supreme Court Weighs In On Personal Jurisdiction Over Foreign Companies

For the first time in more than two decades, the U.S. Supreme Court has weighed in on issues of personal jurisdiction. On June 27, 2011, the Court addressed the constitutional limits of "general" and "specific" jurisdiction in Goodyear Luxembourg Tires, S.A. v. Brown, No. 10-76, 564 U.S. __ (June 27, 2011), and J. McIntyre Mach., Ltd. v. Nicastro, No. 09-1343, 564 U.S. __ (June 27, 2011).

In Goodyear Luxembourg Tires, S.A. v. Brown, a unanimous Court held that a court may only exercise general jurisdiction over a foreign defendant where the defendant's contacts in the forum state are "continuous and systematic." 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 Mach., Ltd. v. Nicastro, a majority of the Court 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. Although there was no majority opinion, six justices agreed that a state court cannot exercise specific jurisdiction over a foreign manufacturer solely because it knew or should have known that its product "might" be sold in New Jersey.

1. Goodyear Luxenbourg Tires, S.A. v. Brown

   In Goodyear, Justice Ginsburg, writing for a unanimous Court, addressed the limits of a state court's general jurisdiction over foreign subsidiaries of a U.S. parent corporation. The Court reaffirmed its decision in International Shoe and stressed the importance of "continuous and systematic" contacts for the exercise of general jurisdiction.

   The case arose from a bus accident outside Paris in which two boys from North Carolina were killed. The boys' parents commenced an action for wrongful death damages in North Carolina state court. The parents alleged that the bus accident was caused by a tire failure and named as defendants The Goodyear Tire & Rubber Company ("Goodyear USA"), an Ohio corporation, and three of its subsidiaries, which were organized and operated in Turkey, France, and Luxembourg, respectively.

   The subsidiaries manufactured tires primarily for European and Asian markets. These tires differ in size and construction from tires ordinarily sold in the United States. Moreover, the foreign subsidiaries were not registered to do business in North Carolina; had no place of business, employees, or bank accounts in the state; did not design, manufacture, or advertise their products in the state; and did not solicit business in the state or sell or ship tires to North Carolina customers. However, other Goodyear USA affiliates distributed a small percentage of their tires within North Carolina, generally in response to custom orders.

   Goodyear USA did not contest the North Carolina court's jurisdiction over it, but Goodyear USA's foreign subsidiaries maintained that North Carolina lacked adjudicatory authority over them. The foreign...