Last year’s end-of-Term Supreme Court international practice case, Morrison v. National Australia Bank, No. 08-1191 (S. Ct. June 2010), has ushered in a year’s worth of jurisdiction shifting cases attempting to be faithful to the Supreme Court’s dictate that Section 10(b) of the Securities Exchange Act of 1934 did not provide a private cause of action in “foreign-cubed” cases—cases where foreign plaintiffs sue foreign defendants for misconduct in connection with securities traded on foreign exchanges (hence “foreign cubed”). The decision has been applied to non-securities cases as well (see our various postings concerning Morrison, including here).
It is our prediction that this year’s end-of-Term Supreme Court international practice case, Goodyear Dunlop Tires Operations, S.A. et al. v. Brown, 10-76 (S. Ct. June 2011), will not have such broad or bold effects. The decision is still important from an international practice perspective and so merits a brief description here.
The parties to the suit were North Carolina residents whose sons died in a bus accident in France. They filed a suit for wrongful-death damages in North Carolina state court alleging that the accident was caused by tire failure. Named as defendants were Goodyear USA, an Ohio corporation, as well as three Goodyear USA subsidiaries, organized and operating, respectively, in Luxembourg, Turkey, and France. It was the three non-U.S. affiliates who were petitioners, claiming no personal jurisdiction over them.
In reciting the facts, the Court noted that the tires of the Goodyear entities sued are manufactured primarily for European and Asian markets and differ in size and construction from tires ordinarily sold in the United States; that these defendants are not registered to do business in North Carolina; have no place of business, employees, or bank accounts in the State; do not design, manufacture, or advertise their products in the State; and do not solicit business in the State or sell or ship tires to North Carolina customers. A small percent-age of their tires, however, were distributed in North Carolina by other Goodyear USA affiliates. The Court estimated the amount at “tens of thousands out of tens of millions manufactured between 2004 and 2007”.
The Court made three rulings of pertinence here:
First, the Court reaffirmed the difference between “specific jurisdiction” and “general jurisdiction”. (See generally our discussion of the topic general and specific jurisdiction in our e-book, International Practice: Topics and Trends.) Specific jurisdiction requires a nexus between the jurisdiction and matter in suit, e.g., the accident occurred in the jurisdiction. General jurisdiction covers those “instances in which the continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities”. There have been very few Supreme Court decisions addressing the issue of general jurisdiction (two, says the Court).
Second, the Court had little trouble determining that the facts alleged here were insufficient to justify a conclusion of general jurisdiction. The “stream of commerce” line of cases seemed inapt; here the accident occurred outside the jurisdiction of suit. And “continuous activity of some sorts within a state” didn’t work here either for the non-U.S. affiliates.
Third, belatedly the plaintiffs argued that there existed a “single enterprise” between Goodyear USA and the non-U.S. affiliates. Because the issue was not raised below or in the petition for certiorari, the Court found the position “forfeited”.