Client Alert

The U.S. Supreme Court Narrows the Jurisdictional Reach of U.S. Courts in Products-Liability Litigation

July 11, 2011

Stephen B. Kinnaird, Charles A. Patrizia, Kristen Chang Winckler,
James E. Berger & Igor V. Timofeyev

In two highly anticipated decisions, the U.S. Supreme Court both clarified and reshaped how the law of personal jurisdiction applies to foreign corporations selling their products to customers in the United States. In Goodyear Dunlop Tires Operations, S.A. v. Brown, No. 10-76 (June 27, 2011), the Supreme Court reaffirmed that foreign companies are not subject to state courts general jurisdiction the power to decide claims unrelated to a companys activities in a state unless the companys contacts with the state were continuous and systematic. Specifically, the Court held that a foreign corporations placement of goods in the stream of interstate commerce alone cannot support general jurisdiction in a state where those goods end up being sold. In J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343 (June 27, 2011), the Supreme Court imposed limits on a state courts specific jurisdiction the power to decide claims related to activities occurring within or affecting the state. The majority of the justices concluded that a foreign corporations targeting of the U.S. market as a whole for sales of its products through an independent distributor would not permit a state to exercise specific jurisdiction over the corporation unless it had also targeted that specific state.

Taken together, Goodyear and Nicastro suggest that foreign corporate defendants (and, possibly, even out-of-state U.S. corporate defendants, who are considered foreign from the perspective of state sovereignty) may be able to avoid state court jurisdiction and thereby limit their products-liability exposure by strategically structuring their sales activity in the United States.

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