United States: Stream Of Commerce Analysis Does Not Support General Jurisdiction Over A Foreign Corporation

This article previously appeared in Last Month at the Federal Circuit, July, 2011.

[Appealed from N.C. Ct. App.]

In Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76 (U.S. June 27, 2011), the Supreme Court reversed the judgment of the North Carolina Court of Appeals that general jurisdiction existed over foreign corporations whose tires reached the State through the stream of commerce.  The Court's decision addressed the question of whether "foreign subsidiaries of a United States parent corporation [are] amenable to suit in state court on claims unrelated to any activity of the subsidiaries in the forum State."  Slip op. at 1.

North Carolina residents whose sons died in a bus accident outside Paris, France, filed a wrongful-death suit in North Carolina state court, claiming that the accident was caused by a defective tire manufactured in Turkey at a foreign subsidiary of The Goodyear Tire and Rubber Company ("Goodyear USA").  The suit named Goodyear USA, an Ohio corporation with plants in North Carolina, and three of its subsidiaries, organized and operating in Turkey, Luxembourg, and France, respectively (collectively "Petitioners").  Unlike Goodyear USA, its foreign subsidiaries contested jurisdiction.  The trial court denied Petitioners' motion to dismiss and the North Carolina Court of Appeals affirmed, concluding that general jurisdiction existed over Petitioners.  The Supreme Court granted certiorari.

As the Supreme Court held in the landmark decision International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), jurisdiction over an out-of-state defendant must comply with "traditional notions of fair play and substantial justice."  Cases following International Shoe "have differentiated between general or all-purpose jurisdiction, and specific or case-linked jurisdiction."  Slip op. at 2.  General jurisdiction over a foreign corporation exists when the contacts with the forum State are "so 'continuous and systematic' as to render them essentially at home in the forum State."  Id.  Leading indicators triggering general jurisdiction are defendant's domicile, place of incorporation, and principal place of business.  Specific jurisdiction, however, is based on the connection between the forum State and the underlying controversy where the defendant purposefully avails itself of the privilege of conducting activities within the forum.  Thus, specific jurisdiction is "confined to adjudication of 'issues deriving from, or connected with, the very controversy that establishes jurisdiction.'"  Id.  (citation omitted).

Here, because the bus tire involved in the accident was manufactured and sold abroad, North Carolina courts lacked specific jurisdiction.  In considering whether general jurisdiction exists over Petitioners, however, the North Carolina courts conflated general and specific jurisdictional inquiries.  The North Carolina courts incorrectly concluded that some of the tires made abroad that reached North Carolina through the stream of commerce gave rise to general jurisdiction over the foreign corporations.  "A connection so limited between the forum and the foreign corporation . . . is an inadequate basis for the exercise of general jurisdiction."  Id. at 3.

That is particularly true where, as here, the connections between Petitioners and North Carolina are so tenuous.  Petitioners manufacture tires primarily for sale in European and Asian markets, and the tires differ in size and construction from those sold in the United States.  Petitioners are not registered to do business in or have any place of business, employees, or bank accounts in North Carolina.  Petitioners do not solicit business in North Carolina or themselves sell or ship tires to customers in North Carolina.  A small percentage of Petitioners' tires are distributed in North Carolina by other Goodyear USA affiliates.  These facts, in the Court's view, did not rise to the "continuous and systematic contacts" with the forum necessary for general jurisdiction.  Accordingly, the Court reversed the judgment of the North Carolina Court of Appeals.

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