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Client Alert: Supreme Court To Address Exercise of Personal Jurisdiction Over Foreign Companies

Date: Oct 28, 2010

On September 28, 2010, the Supreme Court of the United States granted certiorari in two cases, Goodyear Luxembourg Tires v. Brown, U.S., No. 10-76, and J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343.[1] The cases are set to be argued in tandem.

Thirty years ago, the Supreme Court stated that "[t]he Due Process Clause, by ensuring the ‘orderly administration of the laws,' gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit."[2]

In J. McIntyre, the Court will address whether a " ‘new reality' of a contemporary international economy' " permits states to exercise personal jurisdiction over foreign manufacturers under a stream of commerce theory when the manufacturer targets the United States market and the product is purchased by a consumer in the forum state. In Goodyear, the Court will examine whether general personal jurisdiction may be properly exercised over foreign corporations in causes of action not arising out of a foreign corporation's contacts with the forum state, when products placed in the stream of commerce by the foreign corporation are distributed in the forum state by other entities.[3]

The Supreme Court has said that the " . . . Federal Government must speak with one voice when regulating commercial relations with foreign governments. . . "[4] In this regard, the Supreme Court's grant of certiorari is an important step in the right direction. Any additional pronouncements, clarifications and analysis that the Supreme Court may provide will help foreign companies better assess their litigation risk and develop company objectives accordingly.

J. McIntyre Machinery, Ltd. v. Nicastro

In Nicastro v. McIntyre Machinery America, Ltd., an employee of Curcio Scrap Metal was injured by a recycling machine used to cut metal.[5] J. McIntyre Machinery, Ltd. (J. McIntyre), a company incorporated in the United Kingdom, manufactured the machine. McIntyre Machinery America, Ltd. (McIntyre America), the exclusive American distributor for J. McIntyre, sold the machine to Curcio Scrap Metal. The machine was shipped from McIntyre America's headquarters in Ohio to New Jersey. McIntyre America and J. McIntyre were distinct corporate entities. J. McIntyre and McIntyre America were named as defendants in plaintiff's New Jersey product-liability action. J. McIntyre challenged the exercise of personal jurisdiction over it by New Jersey courts.

The Supreme Court of New Jersey reaffirmed its reasoning in another case, Charles Gendler v. Telecom Equipment Corp.[6], and held that "a foreign manufacturer that places a defective product in the stream of commerce through a distribution scheme that targets a national market, which includes New Jersey, may be subject to the in personam jurisdiction of a New Jersey court in a product-liability action." Moreover, the court stated that "[a] manufacturer that wants to avoid being haled into a New Jersey court need only make clear that it is not marketing its products in this State."[7]

The court found that J. McIntyre targeted the United States market by engaging McIntyre America as its distributor. Since J. McIntyre and McIntyre America company officials attended trade shows and conventions in various cities in the United States, the court found that "J. McIntyre knew or reasonably should have known that the distribution system extended to the entire United States." The court recognized that the joint appearances by J. McIntyre and McIntyre America at trade shows where it was clear that attendees came from areas other than the cities hosting the events, "were calculated efforts to penetrate the overall American market." Furthermore, the court noted that although J. McIntyre may not have had a list of McIntyre America's customers "it knew or reasonably should have known that its machines were being sold in states other than Ohio and in cities other than where the trade conventions were held."

In their Petition for a Writ of Certiorari, Petitioners explained that "[a] finding of personal jurisdiction under the stream-of-commerce approach can properly rest only upon a finding of some purposeful conduct, knowledge or awareness by the defendant that an exercise of jurisdiction over it would not offend traditional notions of fair play and substantial justice."[8] Petitioners also stated that, "[u]ntil now, a defendant's single act of placing an allegedly defective product into the stream-of-commerce outside the forum, without more, has never been enough to confer jurisdiction."

Goodyear Luxembourg Tires v. Brown

In Brown v. Meter, two North Carolina thirteen year olds died in a bus accident in France when one of the bus' tires allegedly failed.[9] Various Goodyear affiliates including Goodyear Lastikleri T.A.S. (Goodyear Turkey) (the manufacturer of the tire that allegedly failed), Goodyear Luxembourg Tires SA, and Goodyear Dunlop Tires France SA were sued on "theories arising from an alleged negligent ‘design, construction, testing, and inspection' of and failure to warn about alleged latent defects" in the tire. The North Carolina Court of Appeals affirmed the trial court's finding that the exercise of general personal jurisdiction over the Goodyear defendants "comports with Due Process and does not offend traditional notions of fair play and justice."

While the appeals court noted that defendants were not "directly responsible for the presence in North Carolina of tires that they had manufactured," the court found that several thousand tires that each defendant manufactured found their way into North Carolina markets. Moreover, the court concluded that the defendants "purposefully and intentionally manufactured tires and placed them in the stream of interstate commerce without any limitation on the extent to which those tires could be sold in North Carolina. Defendants also knew or should have known that a Goodyear affiliate obtained tires manufactured by Defendants and sold them in the United States in the regular course of business." The court concluded that due process was not violated because the defendants could reasonably expect to be haled into North Carolina courts.

In their Petition for a Writ of Certiorari, Petitioners argued that the court of appeals decision "vastly exceeds the scope of general jurisdiction permitted by th[e] [Supreme] Court's decisions and threatens to subject corporations whose products are distributed in the ‘stream of commerce' to universal jurisdiction, even over entirely unrelated claims, wherever their products are distributed by other entities."[10]

Petitioners noted that if accepted, the rule adopted by the appeals court, would authorize "expansive assertions of personal jurisdiction" in other states with long-arm statutes that allow jurisdiction to the full extent permitted by due process. According to Petitioners, this is problematic because:

(1) the appeals court's decision "invites rampant forum shopping;"

(2) "the issue is of tremendous importance to the economy . . . both because of the burden (and deterrent effect) of forcing businesses to defend claims in adverse fora where they have no presence, and because the threat of being haled into court wherever one's products are shipped will necessarily act as a disincentive to engaging in interstate and international commerce with the United States;"

(3) "the rule adopted below fundamentally undermines the predictability and fairness that are at the core of due process constraints on personal jurisdiction;" and

(4) "the decision threatens to interfere with important international relations interests of the United States."

In their opposition Respondents argued that the court of appeals was correct in finding general jurisdiction.[11] Respondents explained, the tire at issue "although sold in France, was designed and manufactured by the defendants so that it could be sold in the United States." "Not only could the defendants reasonably anticipate being haled into court in North Carolina for the sale of one of their tires – they could have been haled into court in North Carolina for the sale of this very tire, were it not for a happenstance of distribution which sent the tire to France instead of North Carolina."

Foreign Manufacturers Legal Accountability Act of 2010

Companies should also be aware of legislative efforts currently moving forward in the United States Congress. Representative Betty Sutton introduced H.R. 4678, the Foreign Manufacturers Legal Accountability Act of 2010, on February 24, 2010.[12] The bill, which currently has 64 cosponsors, would require foreign manufacturers of products (and components used to manufacturer them) to "register an agent in the United States who is authorized to accept service of process on [their] behalf . . . "[13] Foreign manufacturers who register an agent are deemed to have consented to "the personal jurisdiction of the State or Federal courts of the State in which the registered agent is located. . . " Under the bill, no person may import into the United States covered products (or component parts) manufactured outside of the United States by a manufacturer who does not have a registered agent.

The bill covers certain products that are regulated by agencies including the Food and Drug Administration, the Consumer Product Safety Commission, the Environmental Protection Agency, and, as recently amended, the National Highway Traffic Safety Administration. The House Committee on Energy and Commerce recently considered H.R. 4678 and by a vote of 31-22 favorably reported H.R. 4678 to the House with amendments.[14]

The House may move on H.R. 4678 as early as this year. If the bill is successful in the House, it will move on to the Senate and then the President for final approval.



[1] Various case materials related to the petitions for writ of certiorari can be found by visiting http://www.scotusblog.com/case-files/cases/goodyear-luxembourg-tires-sa-v-brown and http://www.scotusblog.com/case-files/cases/j-mcintyre-machinery-v-nicastro (last visited October 19, 2010)

[2] World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945))

[3] See Questions Presented in Petitioners' Writs of Certiorari

[4] Michelin Tire Corp. v . Wages, 423 U.S. 276, 285 (1976); See also Brief for the Chamber of Commerce of the United States of America as Amicus Curiae in Support of Petitioners at 16, Goodyear, U.S., No. 10-76 (quoting Michelin, 423 U.S. at 285 (1976))

[5] 987 A.2d 575 (N.J. 2010)

[6] 102 N.J. 460 (1986)

[7] Nicastro, 987 A.2d at 591 (citation omitted)

[8] Petition for a Writ of Certiorari at 16, J. McIntyre, U.S., No. 09-1343 (filed May 3, 2010) (citing Asahi Metal Indus. Co. v. Sup. Court, 480 U.S. 102, 112, 117 (1987); World-Wide Volkswagen, 444 U.S. at 298)

[9] 681 S.E.2d 382, 384 (N.C. Ct. App. 2009)

[10] Petition for a Writ of Certiorari, Goodyear, U.S., No. 10-76 (filed July 13, 2010)

[11] Brief in Opposition to Petition for a Writ of Certiorari, Goodyear, U.S., No. 10-76 (filed August 27, 2010)

[12] http://www.thomas.gov (search for bill number H.R. 4678) (last visited October 19, 2010)

[13] http://energycommerce.house.gov/documents/20100720/HR4678_as_forwarded.pdf (H.R. 4678 as amended by the Subcommittee on Commerce, Trade, and Consumer Protection) (last visited October 19, 2010)



[1] Various case materials related to the petitions for writ of certiorari can be found by visiting http://www.scotusblog.com/case-files/cases/goodyear-luxembourg-tires-sa-v-brown and http://www.scotusblog.com/case-files/cases/j-mcintyre-machinery-v-nicastro (last visited October 19, 2010)

[2] World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945))

[3] See Questions Presented in Petitioners' Writs of Certiorari

[4] Michelin Tire Corp. v . Wages, 423 U.S. 276, 285 (1976); See also Brief for the Chamber of Commerce of the United States of America as Amicus Curiae in Support of Petitioners at 16, Goodyear, U.S., No. 10-76 (quoting Michelin, 423 U.S. at 285 (1976))

[5] 987 A.2d 575 (N.J. 2010)

[6] 102 N.J. 460 (1986)

[7] Nicastro, 987 A.2d at 591 (citation omitted)

[8] Petition for a Writ of Certiorari at 16, J. McIntyre, U.S., No. 09-1343 (filed May 3, 2010) (citing Asahi Metal Indus. Co. v. Sup. Court, 480 U.S. 102, 112, 117 (1987); World-Wide Volkswagen, 444 U.S. at 298)

[9] 681 S.E.2d 382, 384 (N.C. Ct. App. 2009)

[10] Petition for a Writ of Certiorari, Goodyear, U.S., No. 10-76 (filed July 13, 2010)

[11] Brief in Opposition to Petition for a Writ of Certiorari, Goodyear, U.S., No. 10-76 (filed August 27, 2010)

[12] http://www.thomas.gov (search for bill number H.R. 4678) (last visited October 19, 2010)

[13] http://energycommerce.house.gov/documents/20100720/HR4678_as_forwarded.pdf (H.R. 4678 as amended by the Subcommittee on Commerce, Trade, and Consumer Protection) (last visited October 19, 2010)