Supreme Court rules foreign subsidiary not subject to personal jurisdiction

[JURIST] The US Supreme Court [official website; JURIST news archive] on Monday ruled [opinion, PDF] unanimously in Goodyear v. Brown [Cornell LII backgrounder; JURIST report] that foreign subsidiaries of the American corporation Goodyear Tire and Rubber Company [corporate website] are subject to neither specific nor general personal jurisdiction in North Carolina. Two North Carolina teenagers were killed in a bus accident in France when a tire manufactured in Turkey malfunctioned. The boys' parents initiated a wrongful death lawsuit against Goodyear and the petitioners, three Goodyear subsidiaries, organized and operated in Luxembourg, Turkey and France. The North Carolina Court of Appeals [official website] ruled [opinion, PDF] that the defendants were subject to general personal jurisdiction in North Carolina. The Supreme Court, in an opinion by Justice Ruth Bader Ginsburg, reversed the lower court, holding that North Carolina lacks personal jurisdiction over the foreign subsidiaries. Because the cause of action does not arise out of or relate to any contacts between the suit and the forum state, the North Carolina court lacked specific jurisdiction. Furthermore, the court refused to recognize that the state court had general personal jurisdiction over the matter:

A connection so limited between the forum and the foreign corporation, we hold, is an inadequate basis for the exercise of general jurisdiction. Such a connection does not establish the "continuous and systematic" affiliation necessary to empower North Carolina courts to entertain claims unrelated to the foreign corporation's contacts with the State.
The court relied primarily on International Shoe Co. v. Washington, which provides that state courts may exercise personal jurisdiction over an out-of-state defendant who has "certain minimum contacts with [the State] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" The petitioners manufacture their tires primarily for European and Asian markets, and the tires differ in size and construction from tires ordinarily sold in the US. Furthermore, the petitioners are not registered to do business in North Carolina, have no place of business, employees, or bank accounts in the state, do not design, manufacture, or advertise their products in the state, do not solicit business in the state, and do not sell or ship tires to North Carolina customers. A small percentage of their tires were distributed in North Carolina by other Goodyear affiliates, however. Based on these circumstances, the court concluded, the respondents had failed to show that the petitioners placed their tires in the North Carolina "stream of commerce" such that the state court had personal jurisdiction over the matter.

The respondents had argued in their merits brief [text, PDF] that refusing to find jurisdiction over foreign subsidiaries of US corporations would encourage outsourcing to avoid litigation in the US. The petitioners argued [merits brief, PDF] that a finding of personal jurisdiction would invite forum shopping and deter interstate and foreign commerce. The Supreme Court did not address either of these arguments in its opinion.

 

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