In a pair of decisions announced at the end of June, the Supreme Court attempted to clarify the constitutional limitations on the exercise of jurisdiction by state courts on foreign corporations. In both cases, the Court reversed a finding of a state supreme court supporting jurisdiction.
Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76, slip op., 564 U.S.___, 2011 WL 2518815, (June 27, 2011), dealing with general (all-purpose) jurisdiction was unanimous and emphasizes that before a foreign corporation can be subject to a state’s general jurisdiction, its activities in the state must be so continuous and substantial as to amount to de facto domiciliary status: absent such contact an assertion of general jurisdiction on a claim with no relation to the forum state violates Due Process standards.
McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343, slip op., 564 U.S.___, 2011 WL 2518811, (June 27, 2011) on specific (claim related) jurisdiction is a plurality decision (with a vigorous dissent by Justice Ginsberg) which holds that state-specific contacts are required to exercise jurisdiction over a foreign defendant – general contact with other states and an intent to market in the U.S. is insufficient to warrant exercise of specific jurisdiction in a particular state. The opinions are briefly discussed below.
Goodyear - General Jurisdiction: In Goodyear the Court, in a unanimous decision written by Justice Ginsburg, confirmed that a court may exercise general (all-purpose) Jurisdiction over a defendant (extending to claims with no tie to any act of defendant in the forum) only when the foreign defendant's activities within the state are so continuous and substantial as to the corporate being "at home" in the forum, and analogized the degree of presence required to the concept of domicile for an individual defendant. Slip. op. at 7, *6.
The bus accident which led to the litigation took place in France, and the injured persons and their estates were residents of North Carolina. The accident was alleged to be the result of a defective tire manufactured by foreign subsidiaries of The Goodyear Tire and Rubber Company (“Goodyear US”). The foreign subsidiaries had no contacts with North Carolina, aside from the fact that a small percentage of their tires were sold in North Carolina through other affiliates of Goodyear US. The Supreme Court of North Carolina found the foreign subsidiaries subject to general jurisdiction in North Carolina because they had placed their tires “in the stream of interstate commerce without any limitation on the extent to which those tires could be sold in North Carolina.” The Supreme Court reversed, holding the “attenuated connections to the State fall far short of the “continuous and systematic general business contacts” necessary to empower North Carolina to entertain suit against them on claims unrelated to anything that connects them to the State.” Slip. op. at 13, *10.
The “at home” standard is announced by the Court as intending to correct lower court decisions, which (as the Supreme Court of North Carolina did here) applied a “stream of commerce” analysis to find general jurisdiction, a result which, the Court held “elided the essential difference between case-specific and all-purpose (general) jurisdiction.” Slip op. at 10, *8. The opinion affirms strongly that constitutional standards of due process require substantial and continuous activity in a state before a foreign corporation may be subject to general jurisdiction in the state.
McIntyre Machinery - Specific Jurisdiction: In McIntyre a machine manufactured by defendant McIntyre Machinery in the United Kingdom wound up in New Jersey and seriously injured the hand of Nicastro, a worker in a New Jersey scrap metal plant. McIntyre sold the machine though a U.S. distributor, with which it had a contract for U.S. sales, and it attended sales conventions in various states — but not New Jersey. It had no operations in New Jersey and had not advertised in the State.
The New Jersey Supreme Court concluded that New Jersey could appropriately exercise specific jurisdiction, consistent with the Due Process Clause. It relied upon what it called “the stream of commerce doctrine of jurisdiction” to hold that McIntyre knew or reasonably should have known that its products were distributed through a nationwide distribution system which might lead to sale in any of the fifty states and had “failed to take some reasonable step to prevent the distribution of its products in this State,” with the claim arising from that “contact” with the state, so that specific jurisdiction was appropriate. Slip op. 3-4, *5.
The Supreme Court reversed, with the plurality (Kennedy, Roberts, Scalia, Thomas) decision holding that the key to specific jurisdiction was a defendant’s “purposefully availing itself of the privilege of conducting activities in the forum State, thus invoking the benefits and protection of its laws.” Slip Op. 7. *6. Here, Justice Kennedy noted, while McIntyre had contacts with other states (through its attendance at trade conventions), it had no contacts with New Jersey. The fact that McIntyre might have “foreseen” that its product would end up in New Jersey was not, the plurality held, a basis for jurisdiction. State specific contacts are required, and anticipating that a McIntyre product might wind up in New Jersey was not sufficient contact to meet Due Process minimum contacts requirements. Justices Breyer and Alito concurred in the result, and in also disapproving New Jersey’s foreseeability based test, but voted for reversal on the ground that “a single sale of a product in a State does not constitute an adequate basis for asserting jurisdiction over an out-of-state defendant, even if that defendant places his good in the stream of commerce, fully aware (and hoping) that such a sale will take place.” Slip Op. at 2, *10. In a blistering dissent, Justice Ginsburg, joined by Sotomayor and Kagan opined that “the splintered majority today turns the clock back to the days before modern long-arm statutes when a manufacturer, to avoid being haled into court where a user is injured, need only Pilate-like wash its hands of a product by having independent distributors market it”. Slip Op. 1-2, *13. Ginsburg would have found jurisdiction, holding that the manufacturer’s intent to market in the United States constituted purposeful availment of the benefits of the laws of New Jersey, with place of injury as an appropriate particular forum.
Combined, Goodyear and McIntyre mandate that state-specific contacts provide the basis for a constitutional exercise of jurisdiction over corporations foreign to a particular state. For general jurisdiction, for a non forum-related claim, Goodyear holds that the contacts must be so substantial and continuous that the foreign corporation is effectively domiciled in the state — a very high threshold. While the requirement for substantial and continuous contact had previously been articulated by the Court, see, Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984), the “at home” formulation is new, and arguably is a significant upgrade of the level of contacts required. For specific jurisdiction, under McIntyre, the contact must be specific to the forum state, not to the United States generally, and, as always, the claim must arise from the contact. McIntyre may prove to be limited to its particular facts, as the foreign corporation had no contact at all with the forum state, which may not often be the case: however, the plurality holding certainly reflects a repudiation of the foreseeability analysis of stream of commerce and an emphasis on the requirement for actual contacts in a particular state in order to satisfy Due Process requirements.1