The Supreme Court Revisits Personal Jurisdiction in Goodyear Case

Posted on January 14, 2011 By Cory L. Andrews

To see how Washington Legal Foundation’s arguments would fare (we filed an amicus brief in support of Goodyear), I attended Tuesday’s Supreme Court oral argument in Goodyear Luxembourg Tires SA v. Brown.  The question before the Court was:

Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products initially placed in the stream of commerce by the corporation.

In other words, is a foreign company subject to suit in the United States solely because another entity sells that foreign company’s products in the United States?

The lawsuit centers on an allegedly defective tire manufactured in Turkey and involved in an auto accident in France.  None of the events giving rise to the accident occurred in the United States, and none of the defendants–three tire manufacturers operating in Luxembourg, Turkey, and France–are citizens or residents of the United States.  These tire manufacturers took no affirmative action to cause their tires to be distributed in North America, and the type of tire involved in the accident is not distributed in the United States.  Yet, despite the absence of any meaningful connection between the three foreign tire companies and the United States, plaintiffs sought to hale each of them into a North Carolina state court.

The case raises important issues about the continued viability of the Supreme Court’s longstanding protections against the exercise of personal jurisdiction by U.S. courts over foreign corporations.

As detailed in WLF’s brief, the foreseeability that a product placed in the stream of commerce might end up in the United States, standing alone, has never been the legal threshold for satisfying personal jurisdiction under the Supreme Court’s jurisprudence.  Instead, the Supreme Court has inquired whether the defendant’s conduct and connection with the forum State are such that it should reasonably anticipate being haled into court there.  This inquiry is only satisfied when the defendant “purposefully avails” itself of the privilege of conducting activities in the forum state.

Judging from the reaction of the justices at oral argument, I think we can expect to see a unanimous reversal of the North Carolina Court of Appeals.  The plaintiffs’ attorney emphasized the “integrated distribution scheme” of the Goodyear subsidiaries and their American parent.  But Justice Scalia pointed out that the mere fact that an American distributor coordinates with its subsidiary does not mean that the subsidiary is an agent of the parent.  And when asked by Justice Ginsburg to cite any case law that would support the suggestion that wherever a parent is subject to general jurisdiction, the subsidiary must be as well, the plaintiffs’ attorney had nothing to offer.

*Posted on www.blogs.forbes.com