Goodyear And McIntyre: The More Things Change ...
As published in Product Liability Law360
In the months since the United States Supreme Court decided, in June 2011, its first two cases on civil procedure in over 30 years, not much appears to have changed. Lower courts with an opportunity to interpret these decisions tend to cite the new cases in conjunction with existing Supreme Court precedent rather than interpreting the decisions as changing the landscape of personal jurisdiction law.
While in effect the Goodyear case simply reiterated the standard for general jurisdiction, the McIntyre case appears to have further muddied the already murky waters of specific jurisdiction and the stream of commerce theory. As noted by Justice Stephen Breyer in his concurrence in McIntyre, the continuing lack of a clear standard likely means that the court will have to grant certiorari in another case to provide clarity to specific jurisdiction.
In Goodyear Dunlop Tires Operations SA v. Brown, the Supreme Court considered and rejected the lower court’s more expansive view of general jurisdiction, which justified the exercise of jurisdiction based upon the foreign subsidiaries' placement of their products into the “stream of commerce.”
The decision, written by Justice Ruth Bader Ginsburg for a unanimous court, does not stray far from existing precedent and, in fact, reinforces the Supreme Court’s prior approach to determining general jurisdiction.
Specifically, the Supreme Court reinforced prior precedent that courts may assert general jurisdiction over foreign corporations to hear any and all claims against them when their contacts with the state are so “continuous and systematic” as to render them essentially at home in the forum state.
On the other hand, the Supreme Court determined that the mere sale of a foreign corporation's products sporadically in the state through intermediaries is insufficient to warrant a state's assertion of general jurisdiction. Following the Supreme Court, many of the lower court opinions citing Goodyear do so in conjunction with prior precedent and not as the sole grounds to grant or deny jurisdiction.
Goodyear is most often cited in support of courts declining the exercise of jurisdiction over foreign defendants without significant contacts with the forum state and does not appear to have drastically changed the existing approach to general jurisdiction that requires continuous and systematic business contacts.
The J. McIntyre Machinery v. Nicastro case, handed down the same day as Goodyear, addressed specific jurisdiction, which provides that where a defendant purposefully avails itself of the privilege of conducting activities within the forum state, it submits to the judicial power of the that state in a suit arising from the defendant's contacts there.
While McIntyre attempted to provide clarity to the “stream of commerce” theory asserted in Asahi Metal Industry Co. v. Superior Court, the current justices could not reach a majority opinion. As a result, the plurality opinion is limited by Breyer’s concurrence and appears to provide little assistance in determining the standard for the stream of commerce theory.
The plurality opinion rejected the lower court's holding that the “stream of commerce” theory could be used to find jurisdiction over a foreign defendant who knew or reasonably should have known that its products were distributed through a nationwide distribution system, and that the use of this system might lead to those products being sold in any of the 50 states.
The plurality explained that the principal inquiry for the forum state's jurisdiction must be whether the defendant manifested an intent to submit to the power of the forum or targeted the forum. As a general rule, the plurality concluded, it is not enough that the defendant might have thought its goods would reach the forum state.
Accordingly, in McIntyre, the plurality held that simply inserting products into the stream of commerce to reach the United States is not enough to show purposeful availment of the forum state: The foreign defendant’s actions of marketing to the United States generally do not show that the foreign defendant purposefully availed itself of the forum state specifically.
The plurality called the “stream of commerce metaphor” into doubt and held that its reach is limited by due process and the restrictions on judicial authority ensured by the U.S. Constitution. Therefore, in McInytre, the exercise of personal jurisdiction over the foreign defendant could not be sustained without violating due process.
However, the court gave little insight regarding the actual limits of the stream of commerce theory. This lack of guidance, along with Breyer’s concurrence, has made lower court interpretation of this case challenging.
In his concurring opinion, Breyer expressed concern about the applicability of the plurality's “seemingly strict no-jurisdiction rule” in cases where a defendant did not intend to submit to the power of a sovereign or did not intend to target the forum in the ever-changing world of international and internet commerce.
Breyer wrote that he would not employ such a change to the law “without a better understanding of the relevant contemporary commercial circumstances,” and suggested that the court should take up another case where such considerations may be presented.
Many commentators’ and attorneys’ initial interpretation of these cases was that foreign corporations would more easily prevail in their arguments for lack of personal jurisdiction. However, the effect of McIntyre has not been as strong as some may have expected.
Few lower courts interpreting McIntyre have used it to grant a defendant’s motion for dismissal based on lack of personal jurisdiction. Instead, a number of lower courts have distinguished McIntyre on the facts and found more substantial contacts to satisfy specific jurisdiction.
For example, in one case, the U.S. Court of Appeals for the First Circuit found personal jurisdiction, distinguished McIntyre, and reasoned that the facts of its case involved far more contact with the forum than the sole piece of equipment at stake in McIntyre.
Another case, in an Illinois federal court, found McIntyre distinguishable on its facts based on the Illinois defendant’s direct solicitation of the forum state through marketing. Perhaps more importantly, the case also noted that McIntyre does not discard the stream of commerce theory, despite the McIntyre plurality’s unwillingness to use this theory to find personal jurisdiction, indicating that the standard for that theory is still far from clear.
These cases appear to show that lower courts are declining to apply McIntyre in cases where distinguishing facts can be found, and thus the expected severe limitation on personal jurisdiction has not occurred.
McIntyre will likely also be limited by its lack of majority holding. A Mississippi federal court followed only the Breyer concurrence, reasoning that it was the only part of the opinion that garnered a majority of votes.
That court further reasoned that since no clear rule was announced in McIntyre, it only applies to its specific fact situation. Therefore, the court recognized that while one sale in McIntyre was not enough, the number of sales present in the case before it were enough to exercise jurisdiction.
However, the Mississippi federal case has recently been certified for interlocutory appeal to the Fifth Circuit: The judge realized that while that court “believes ... that McIntyre has little to no precedential value,” there are courts that have applied the previous “mere foreseeability” test and courts that have applied the more strict analysis from the McIntyre plurality opinion.
If the Fifth Circuit follows the approach of the Mississippi federal court that McIntyre can be easily distinguished and that it is limited by Breyer’s concurrence, it will provide further support to the argument that McIntyre’s reach will be limited.
Based on these initial lower court opinions, McIntyre may have limited applicability to specific jurisdiction and the stream of commerce theory because the facts in McIntyre are fairly stark and can be easily distinguished, leaving grey area when courts are trying to determine what connection with the forum is enough.
Would 10 products sold in the forum state satisfy personal jurisdiction? Or would products distributed throughout the United States but marketed online and seen by a forum state user satisfy personal jurisdiction? Lower courts are left to wrestle with these questions with limited guidance from the McIntyre court.
Breyer noted this likelihood in his concurring opinion, realizing that the prevalence of online commerce and marketing will likely necessitate another case and opinion by the court. Though this “new” type of commerce may have required a subsequent case to be heard regardless of the outcome in McIntyre, the current lack of a clear standard has left specific jurisdiction in flux until such a case comes along.
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