U.S. Supreme Court Turns Off "Stream Of Commerce" Jurisdiction At The Tap

Yesterday, the United States Supreme Court delivered two of its most significant opinions on  the subject of personal jurisdiction in nearly twenty-five years (since Asahi Metal Ind. Co. v. Superior Court of California, 480 U.S. 102(1987)).  The new cases are J. McIntyre Machinery, Ltd. v. Nicastro and Goodyear Dunlop Tires Operations, S.A. v. Brown. (linked below)

In Goodyear, Justice Ginsburg authored a unanimous opinion in which the Court reversed a decision by the North Carolina Court of Appeals which she said had "confused" or incorrectly "blended" jurisdictional principles.  The plaintiffs in Goodyear were the parents of two young soccer players who had been killed in a bus accident in France.  Tires manufactured by Goodyear's Turkish subsidiary  were the alleged cause.

The foreign subsidiaries had lost a motion to dismiss made on jurisdictional grounds in the trial court, which had been affirmed by the North Carolina Court of Appeals.  The NC Supreme Court denied a petition for discretionary review, but the Supreme Court accepted certiorari

The Supreme Court reversed, disagreeing with Judge Ervin's conclusion that the sale by the subsidiaries of thousands of tires to North Carolina customers supported a finding of general jurisdiction over them because they had "purposefully injected [their] product into the stream of commerce" without excluding North Carolina from that distribution.  To him, this meant that they had "purposefully availed themselves of the protection of the laws of this State."  681 S.E.2d at 68-69. 

He had concluded that stream of commerce analysis can support a finding of general jurisdiction, necessary because the injury to the soccer players hadn't flowed from the NC sales.

Justice Ginsburg said that the "attenuated connections" to North Carolina fell "far short" of the "'continuous and systematic general business contacts' necessary to empower North Carolina to entertain suit against them on claims unrelated to anything that connects them to the State."

That ruling seems pretty clear, but the companion decision in J. McIntyre clouded things.  It is a fragmented opinion, with Justice Ginsburg this time in the dissent, Justice Breyer concurring, and Justice Kennedy (joined by the Chief Justice and Justices Scalia and Thomas) delivering the plurality opinion.

J. McIntyre had been more deliberate about the sales of its metal recycling machinery in the United States than Goodyear had been for its tires.  J. McIntyre had an affiliated Ohio-based distributor which handled the U.S. sales it had deliberately sought, and it had attended numerous trade shows in the U.S., and it had sold at least one machine in New Jersey, to Nicastro's employer.  The injury to Nicaastro, which involved the severing of four fingers on his right hand, had occurred in New Jersey.

 The New Jersey Supreme Court considered in its opinion the Supreme Court's conflicting opinions in Asahi on how the stream of commerce analysis fits into the personal jurisdiction paradigm (the competing opinions in that case, one by Justice O'Connor and one by Justice Brennan, are discussed by Justice Kennedy in his plurality opinion), 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

Justice Kennedy, in the plurality opinion, disagreed, stating that "as a general rule, the exercise of judicial power is not lawful unless the defendant 'purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'"  It was not enough to the plurality that J. McIntyre had targeted the entire United States as a market and that it perhaps should have foreseen sales in New Jersey.  Forseeability is not the test.  As Justice Kennedy held:

[t]his Court's precedents make clear that it is the defendant's actions, not his expectations, that empower a State's courts to subject him to judgment.

Plurality Op. at 8.

It's hard to assess where jurisdiction stands over foreign entities which  sell some product in various areas of the United States.  The availment of a state's laws must certainly be "purposeful," which isn't a new concept.  It was first articulated by the Supreme Court in Hanson v. Denckla, 357 U.S. 235 (1958).  Justice Ginsburg said that the majority:

turn[s] the clock back to the days before modern long-arm statutes when a manufacturer, to avoid being haled into court where a user is injured, need only Pilate-like wash its hands of a product by having independent distributors market it.

Dissenting Op. at 2.  She said that the majority took "a giant step away from the notions of fair play and substantial justice" imbedded in the notion of the "minimum contacts" necessary to support a finding of personal jurisdiction. 

You can find deeper analysis of these two important Supreme Court opinions at the Civil Procedure & Federal Courts Blog.  There's a lot more to be said about their impact.   They will be confounding those teaching Civil Procedure in our law schools for the next twenty years.  Certainly as much as Asahi did

Trackbacks (0) Links to blogs that reference this article Trackback URL
http://www.ncbusinesslitigationreport.com/admin/trackback/252576
Comments (0) Read through and enter the discussion with the form at the end
Post A Comment / Question Use this form to add a comment to this entry.







Remember personal info?
Send To A Friend Use this form to send this entry to a friend via email.