Supreme Court clarifies jurisdiction

In a ruling sure to reverberate far beyond North Carolina’s borders, the U.S. Supreme Court ruled June 27 that parents of two 13-year-old boys killed in a 2004 bus crash outside Paris cannot subject the foreign makers of a tire that failed to a wrongful death lawsuit brought in Onslow County Superior Court.

The high court rejected what it called a “sprawling view of general jurisdiction… embraced by the North Carolina Court of Appeals,” which in 2009 upheld Onslow Superior Court Judge Gary E. Trawick’s denial of motions to dismiss brought by Goodyear Luxembourg Tires, SA, Goodyear Lastikleri T.A.S. and Goodyear Dunlop Tires France, SA.

The case, Goodyear Dunlop Tires Operations, S.A. v. Brown (Lawyers Weekly No. 11-17-0658, 17 pp.), was brought after a bus carrying soccer players Julian Brown and Matthew Helms overturned on April 18, 2004 on its way to Charles de Gaulle Airport. The boys were on their way home from a soccer tournament in Paris.

The North Carolina Supreme Court denied the defendants’ petition for discretionary review in 2010, but the U.S. Supreme Court “granted certiorari to decide whether the general jurisdiction the North Carolina courts asserted over petitioners [was] consistent with the Due Process Clause of the Fourteenth Amendment.”

It wasn’t.

Writing for a unanimous high court, Justice Ruth Bader Ginsburg observed that the expansive view of jurisdiction advocated by the Goodyear plaintiffs would subject “any substantial manufacturer or seller of goods… to suit, on any claim for relief, wherever its products are distributed.”

Ohio-based Goodyear USA, another defendant in the case, did not contest the Onslow County Superior Court’s jurisdiction.

The tire at issue in Goodyear was manufactured by foreign subsidiaries of Goodyear USA. Those subsidiaries, incorporated in Luxembourg, Turkey and France, manufacture tires primarily for overseas markets, the court found, and those tires differ in size and construction from tires ordinarily sold in the United States.

The issue in Goodyear, Justice Ginsburg wrote, was whether “foreign subsidiaries of a United States parent corporation [are] amenable to suit in state court on claims unrelated to any activity of the subsidiaries in the forum state[.]”

Under longstanding Supreme Court precedent, assertion of jurisdiction over out-of-state corporations must comply with “traditional notions of fair play and substantial justice,” a standard first pronounced in International Shoe Co. v. Washington, 326 U. S. 310 (1945).

Opinions since International Shoe, Justice Ginsburg wrote, “have differentiated between general or all purpose jurisdiction, and specific or case-linked jurisdiction.”

Raleigh attorney David F. Kirby, who represented the plaintiffs in Goodyear, told Lawyers Weekly that the Goodyear case pivoted on the distinction between specific and general jurisdiction.

“Specific jurisdiction grants the forum court the power to decide a single matter – a single injury – as opposed to granting a court general jurisdiction over a foreign corporation, which would extend to all matters,” Kirby said.

The circumstances in Goodyear did not fit neatly into either category, Kirby said, but since the injury occurred outside of North Carolina — meaning courts here could not exercise specific jurisdiction — the plaintiffs had to argue that courts here had general jurisdiction over the foreign Goodyear subsidiaries.

A defendant must have “continuous and systematic contacts” with the forum state in order to fit into International Shoe‘s general jurisdiction framework.

The North Carolina Court of Appeals premised its 2009 opinion on the fact that the foreign Goodyear subsidiaries made “no attempt to keep [their] tires from reaching the North Carolina market.”

Kirby said, “We felt that the commercial contacts the corporations had with North Carolina were sufficient to bring them here to respond to whether their product had killed these two young men.”

But that took the general jurisdiction argument too far, Winston-Salem attorney William K. Davis, who represented the foreign Goodyear subsidiaries, told Lawyers Weekly.

“A plaintiff has to show that the foreign company had continuous systematic activities and a presence in a state such that would justify a court to exercise general jurisdiction, when the claim itself is unrelated to those contacts,” Davis said. “That’s not what we had in this case.”

Instead, Davis said, the plaintiffs in Goodyear argued that “tires the foreign companies manufactured [were distributed] here, therefore the companies were subject to courts’ jurisdiction here.”

In prior general jurisdiction cases, Justice Ginsburg wrote, “a nonresident defendant, acting outside the forum, places in the stream of commerce a product that ultimately causes harm inside the forum.”

While the “[f]low of a manufacturer’s products into the forum… may bolster an affiliation germane to specific jurisdiction,” she added, the flow of products into the forum does “not warrant a determination that, based on those ties, the forum has general jurisdiction over a defendant.” (Emphases in original)

The bottom line, Justice Ginsburg wrote, was that the foreign Goodyear subsidiaries “are in no sense at home in North Carolina” and their contacts with the state were not “the continuous and systematic general business contacts” sufficient to empower North Carolina courts “to entertain suit against them on claims unrelated to anything that connects them to the state.”

And, Davis said, even if the accident had occurred in North Carolina and the plaintiffs had been able to argue that the trial court had specific jurisdiction over the Goodyear subsidiaries, “We would have seen the same outcome, on these facts.”

The high court reversed the judgment of the North Carolina Court of Appeals, which means, Davis said, the case is over for the foreign Goodyear subsidiaries.

Kirby said the case will continue against the remaining defendants, including Goodyear USA and two promotional companies involved in the soccer trip.