SCOTUS Releases Opinion on Specific Jurisdiction

In Goodyear Dunlap Tires Operations, S.A. v. Brown, No. 1076, 564 U.S. ____ (2011) the United States Supreme Court was confronted with the following question: "Are foreign subsidiaries of a United States parent corporation amenable to suit in state court on claims unrelated to any activity of the subsidiaries in the forum State?" The answer: "No."

Here are the facts as reported by the Court:

A bus accident outside Paris that took the lives of two 13-year-old boys from North Carolina gave rise to the litigation we here consider. Attributing the accident to a defective tire manufactured in Turkey at the plant of a foreign subsidiary of The Goodyear Tire and Rubber Company (Goodyear USA), the boys’ parents commenced an action for damages in a North Carolina state court; they named as defendants Goodyear USA, an Ohio corporation, and three of its subsidiaries, organized and operating, respectively, in Turkey, France, and Luxembourg. Goodyear USA, which had plants in North Carolina and regularly engaged in commercial activity there, did not contest the North Carolina court’s jurisdiction over it; Goodyear USA’s foreign subsidiaries, however, maintained that North Carolina lacked adjudicatory authority over them.

…

[The foreign subsidiaries] are not registered to do business in North Carolina. They have no place of business, employees, or bank accounts in North Carolina.

They do not design, manufacture, or advertise their products in North Carolina. And they do not solicit business in North Carolina or themselves sell or ship tires to North Carolina customers. Even so, a small percentage of petitioners’ tires (tens of thousands out of tens of millions manufactured between 2004 and 2007) were distributed within North Carolina by other Goodyear USA affiliates. These tires were typically custom ordered to equip specialized vehicles such as cement mixers, waste haulers, and boat and horse trailers. Petitioners state, and respondents do not here deny, that the type of tire involved in the accident, a Goodyear Regional RHS tire manufactured by Goodyear Turkey, was never distributed in North Carolina.

The Court found that the petitioner defendants were not subject to specific jurisdiction, i.e. that the suit did not arise out of or relate to the conduct of the petitioner defendants in North Carolina.

Thus, the Due Process Clause required the plaintiff-respondent to prove "general jurisdiction," i.e. "continuous corporate operations within a state … so substantial and of such a nature as to justify suit against [a defendant] on causes of action arising from dealings entirely distinct from those activities.” To prove general jurisdiction a plaintiff must demonstrate “continuous and systematic general business contacts.” The Court held that plaintiff did not carry its burden, and thus held that the Due Process Clause did not submit the foreign defendants to suit in North Carolina.

The plaintiff is not necessarily without a remedy here – recall that Goodyear itself is still subject to suit in North Carolina. My guess is that the plaintiffs fought so hard to get jurisdiction over the foreign subsidiaries is because (a) they may have to pierce the corporate veil to maintain a claim against the parent Goodyear; (b) depending on the applicable law several liability may result in many non-parties being allocated fault; and (c) it is so difficult and expensive to obtain necessary discovery from foreign, non-party organizations.