In the last week of its Term, the Supreme Court revisited the thorny question of when courts may exercise jurisdiction over corporate defendants. Of course, no issue is more basic to determining a company’s litigation risk than where it can be sued. The more forums where a business can be brought into court, the less the business can predict what law will apply and therefore what conduct may lead to liability. Grappling with these matters for the first time in decades, the Court laid down strict limits on where a corporation can be subject to all-purpose “general” jurisdiction and clarified somewhat when the “stream of commerce” can subject a corporation to single-issue, “specific” jurisdiction.
In the decision involving general jurisdiction, Goodyear Dunlop Tires Operations, S.A. v. Brown, the Court considered a North Carolina appellate court decision subjecting three European subsidiaries of Goodyear USA to jurisdiction in North Carolina. The suit arose out of a bus accident in France involving a tire made in Turkey and never distributed in North Carolina. According to the North Carolina court, general jurisdiction was proper because some of the subsidiaries’ tires reached North Carolina through the “stream of commerce.” As the Supreme Court explained, however, this analysis “elided the essential difference between casespecific and all-purpose (general) jurisdiction.” The “paradigm forum” for general jurisdiction is “one in which the corporation is fairly regarded as at home.” Thus, “even regularly occurring sales of a product in a State do not justify the exercise of jurisdiction over a claim unrelated to those sales.” The Court unanimously held that while such ties may “bolster the exercise of specific jurisdiction,” they “do not warrant a determination that, based on those ties, the forum has general jurisdiction over a defendant.”
In J. McIntyre Machinery, Ltd. v. Nicastro, the Court spoke with far less unity, but still brought some clarity to the question whether the “stream of commerce” can subject a corporation to single-issue, “specific jurisdiction.” In Nicastro, the New Jersey Supreme Court held that courts can exercise jurisdiction over a foreign manufacturer that “knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states.” Six Justices rejected this test.
Four Justices (Kennedy, C.J. Roberts, Scalia, and Thomas) would have held that “[t]he defendant’s transmission of goods permits the exercise of jurisdiction only where the defendant can be said to have targeted the forum; as a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State.” Rather, as Justice Kennedy wrote for the four, the question is “whether the defendant’s activities manifest an intention to submit to the power of a sovereign.”
Two Justices (Breyer and Alito) rejected these “strict rules” that would turn on the defendant’s intent to target the forum. Instead, as Justice Breyer wrote, earlier opinions (including both plurality opinions in the 4-4 decision in Asahi Metal Industry Co. v. Superior Court of Cal., Solano County, 480 U.S. 102 (1987)) require “something more” than merely placing a product into the steam of commerce “aware that the stream may or will sweep the product into the forum state.” Under these earlier opinions, it was enough that “the relevant facts . . . show no regular . . . flow or regular course of sales in New Jersey; and there is no ‘something more,’ such as special state-related design, advertising, advice, marketing, or anything else.”
Three Justices (Ginsburg, Sotomayor, and Kagan) dissented, criticizing the majority for “turn[ing] the clock back to the days . . . 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.” The dissenters would have found personal jurisdiction over the corporate defendant in Nicastro because it “dealt with the United States as a single market.” Under those circumstances, “it would undermine principles of fundamental fairness to insulate the foreign manufacturer from accountability in court at the place within the United States where the manufacturer’s product caused injury.”
These decisions have important implications for businesses engaged in commerce nationwide. Under Goodyear, general jurisdiction can be avoided by declining to treat a state as “home,” such as by incorporating there or using the state as a principal place of business. And after Nicastro, it is now clear that a company will not be subject to specific jurisdiction in a state merely because it is foreseeable that its products will be carried into that state. But what more is needed to establish specific jurisdiction remains a matter of dispute and will likely be a subject of sharp disagreement in the lower courts in the days ahead.