Near the end of its recently concluded term, the U.S. Supreme Court issued two decisions that determined whether U.S. courts could exercise jurisdiction over foreign companies that made products which allegedly injured U.S. residents. Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76 (U.S., decided June 27, 2011); J. McIntyre Mach., Ltd v. Nicastro, No. 09-1343 (U.S., decided June 27, 2011).
In Goodyear, a unanimous Court held that North Carolina courts could not adjudicate claims filed on behalf of North Carolina teenagers killed in a bus accident that happened in France and involved allegedly defective tires manufactured in Turkey by the foreign subsidiary of a U.S. corporation. Because neither the accident nor the manufacture took place in North Carolina, the courts lacked specific jurisdiction over the tire maker, and, without a “continuous and systematic” connection between the state and the foreign corporation, the courts lacked general jurisdiction as well. According to the Court, while a small percentage of the manufacturer’s tires were distributed in North Carolina by the parent company, this level of economic activity was insufficient as a matter of due process for the courts to exercise general jurisdiction over it because the sporadic sales through intermediaries were not related to the cause of action.
A Court plurality in McIntyre reversed a New Jersey Supreme Court ruling allowing the state court to hear claims against the British manufacturer of a metal-shearing machine that purportedly injured a resident of New Jersey, where the accident occurred. The Court determined that the foreign manufacturer did not purposefully avail itself of the privilege of conducting activities within the forum state and thus did not invoke the benefits and protections of its laws. The company did not market in nor ship its machines to New Jersey, relying instead on a U.S. distributor to sell its products throughout the United States.
Still, the lower court, relying on the Supreme Court’s “stream of commerce” doctrine, said jurisdiction was proper because the injury occurred in New Jersey, the company knew or reasonably should have known that its products were distributed through a nationwide distribution system that might lead to those products being sold in any one of the 50 states, and the company failed to take some reasonable step to prevent the distribution of its product in New Jersey. While rejecting the lower court’s approach, the U.S. Supreme Court was unable to muster a majority to clarify what it meant when it adopted the “stream of commerce” doctrine in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U.S. 102 (1987).
Four justices opined that the doctrine “does not amend the general rule of personal jurisdiction. It merely observes that a defendant may in an appropriate case be subject to jurisdiction without entering the forum—itself an unexceptional proposition—as where manufacturers or distributors ‘seek to serve’ a given State’s market.” Two justices thought the lower court had unwisely announced a rule of broad applicability to accommodate “the increasingly fast-paced globalization of the world economy” in a case that did not present issues reflecting changes in commerce and communications (i.e., the Internet era). These justices refused, however, to join the plurality which had adopted strict rules limiting jurisdiction “where a defendant does not ‘inten[d] to submit to the power of a sovereign’ and cannot ‘be said to have targeted the forum.’” They asked, “But what do those standards mean when a company targets the world by selling products from its Web site?”
The three dissenting justices contended that the plurality allowed a foreign manufacturer to escape products liability litigation in the United States simply by engaging a U.S. distributor to ship its machines to the country.
The U.S. distributor, McIntyre Machinery America, Ltd., was also a defendant, but it did not participate in the appeal; it declared bankruptcy in 2001, the same year the plaintiff was injured. It is unclear from the U.S. Supreme Court or New Jersey Supreme Court rulings whether the litigation will proceed against this party or whether it continues as a viable commercial entity. The foreign manufacturer’s amenability to suit in the New Jersey courts has been the sole matter at issue since it filed a motion to dismiss after the action commenced in September 2003.