Supreme Court Observations: Goodyear Lux. Tires SA v. Brown

Editor’s note: To learn more about this case and many others from the Supreme Court’s October 2010 term, tune in tomorrow at 9:30 for WLF’s annual Assessing the U.S. Supreme Court Term briefing.  Free registration for live online viewing can be completed at WLF’s home page.

Is a foreign company subject to suit in the United States solely because another entity sells that foreign company’s products in the United States?  No, a unanimous Supreme Court held today, reversing a contrary ruling by the North Carolina Court of Appeals in Goodyear Dunlop Tires Operations, S.A. v. Brown.

The lawsuit centered on an allegedly defective tire manufactured in Turkey and involved in an auto accident in France.  None of the events giving rise to the accident occurred in the United States, and none of the defendants–three tire manufacturers operating in Luxembourg, Turkey, and France–were citizens or residents of the United States.  These tire manufacturers took no affirmative action to cause their tires to be distributed in North America, and the type of tire involved in the accident was not even distributed in the United States.  Yet, despite the absence of any meaningful connection between the three foreign tire companies and the United States, the North Carolina Court of Appeals concluded that North Carolina enjoyed personal jurisdiction over the defendants.

Writing for the entire Court, Justice Ginsburg explained that the plaintiffs lacked “the kind of continuous and systematic general business contacts” necessary to allow North Carolina to entertain a suit against them unrelated to anything that connects them to the State.  Specifically, the stream-of-commerce cases on which the North Carolina court relied to find jurisdiction apply only in cases involving the exercise of specific jurisdiction, where a defendant places an item into the stream of commerce that ultimately causes harm inside the forum state.  As a result, “[t]he North Carolina court’s stream-of-commerce analysis elided the essential difference between case specific and general jurisdiction.”

By reinforcing the rule that a corporation’s “continuous activity of some sort within the state is not enough to support the demand that the corporation be amenable to suits unrelated to that activity,” today’s decision marks an important victory for the international business community.

After attending oral argument in the case earlier this January, I predicted: “I think we can expect to see a unanimous reversal of the North Carolina Court of Appeals.”   Even a broken clock is right twice a day.

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