Local Jurisdiction Over Foreign Companies

Two Supreme Court decisions from last term could have a large impact on the business community. Both involved the scope of personal jurisdiction over foreign companies – that is, when a foreign company can be sued in a particular forum chosen by the plaintiff.

Goodyear Dunlop Tires Operations, S.A. v. Brown addressed whether a foreign company whose products wind up in the forum state may be sued on claims unrelated to those products. J. McIntyre Machinery, Ltd. v. Nicastro addressed whether such a company may be sued on claims related to the products when the company itself was never present in the forum state.

Courts distinguish between general jurisdiction, when a company’s contacts with the state are so “continuous and systematic” that it may be sued there regardless of the nature of the claim, and specific jurisdiction, which allows states to adjudicate cases related to specific contacts. The Goodyear decision concerned general jurisdiction, while McIntyre concerned specific jurisdiction.

A unanimous decision in Goodyear provides clear guidance. A state may exercise general jurisdiction over a foreign company, or U.S. company based in another state, only in narrow circumstances. The fact that a company’s products ended up in a given state is not enough to subject the company to general jurisdiction.

With no majority opinion in McIntyre, its implications are unclear. Companies need to assume they might be subject to specific jurisdiction in a state if enough of their products end up there.