In order for a lawsuit to be maintained against a defendant within a particular forum in the United States, the court must have jurisdiction over that person or entity. If a foreign defendant has not consented to be sued in that forum, it must be determined whether there is a basis to exercise either “specific” or “general” jurisdiction. The focus of “specific” jurisdiction is on specific activity conducted within, or specific acts committed within, the forum, and the lawsuit must arise from or relate to such acts/activity. “General” jurisdiction may exist when the defendant has engaged in activity within the forum that is so substantial that the exercise of jurisdiction is appropriate, even though the lawsuit does not directly relate to the activity. The U.S. Supreme Court issued two decisions on June 27, 2011, each of which provides good news to foreign corporations hoping to avoid litigation in the United States.
In one case (Goodyear Dunlop Tires Operations, S.A. v. Brown), suit was brought in North Carolina state court against a domestic company and three of its foreign subsidiaries, incorporated in Turkey, France and Luxembourg. The lawsuit concerned a bus accident in France involving a tire manufactured by the Turkish subsidiary. “Specific” jurisdiction over the foreign companies clearly did not exist, and the small quantity of tires manufactured by the subsidiaries that ended up in North Carolina through the domestic company’s distribution was determined insufficient for “general” jurisdiction.
In the other case (J. McIntyre Machinery, Ltd. v. Nicastro), suit was brought in New Jersey state court against an equipment manufacturer concerning injuries sustained by an individual using that equipment in New Jersey. The manufacturer, which had no direct contact with New Jersey, was incorporated in England, where it manufactured the equipment. The equipment was sold in the United States by an independent distributor. “General” jurisdiction over the manufacturer clearly did not exist in New Jersey, and it was determined that there was no “specific” jurisdiction simply because the equipment manufactured by the British company ended up in New Jersey through the efforts of a truly independent distributor.
BEWARE, because both cases left certain issues undecided. In Goodyear, which was a 9-0 decision, the court did not address the argument that the domestic company and foreign subsidiaries constituted a “single enterprise” for purposes of jurisdictional analysis because the argument was not properly raised in the lower courts. And McIntyre, as a plurality (rather than a majority) decision with a strong dissent, has limited precedential value. Therefore, issues of personal jurisdiction relating to the corporate organization/operation of, and product distribution by, foreign companies remain open for future determination.