Recent Supreme Court Rulings Did Not Change Test for General Jurisdiction Over Corporations

by John Chapman

We have recently run into an argument from a fentanyl patch manufacturer that two recent United States Supreme Court decisions, Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (June 27, 2011) and J. McIntyre Machinery, Ltd. V. Nicastro, 131 S. Ct. 2780 (June 27, 2011) (plurality)), have dramatically changed the jurisprudential landscape for general jurisdiction over corporations. They claim that these two cases upended decades of general jurisdiction jurisprudence by abandoning the “systematic and continuous” contacts test for corporations, instead replacing it with a bright-line rule that a corporation is subject to general jurisdiction in only one of two places: (1) the state where the corporation is incorporated; and (2) the state where the corporation maintains its principal place of business. It remains to be seen whether other corporate defendants will embrace this argument, but one thing is clear; the argument is ridiculous. Any claim that the Supreme Court created a new “rule” is contradicted by the plain language of those Supreme Court decisions, as well as subsequent case law interpreting those decisions.

As a brief reminder, there are two types of personal jurisdiction, (1) general personal jurisdiction, and (2) specific personal jurisdiction General jurisdiction is the broadest type of personal jurisdiction and exists when a defendant’s contacts with a state are “continuous and systematic.” International Shoe Co. v. Washington, 326 U.S. 310, 317 (1945). Under this theory of jurisdiction, a court may hear any and all claims against a defendant. Specific jurisdiction, by contrast, limits a court to resolving only those claims that “arise out of or are connected with the activities [of the defendant] within the state.” Id. at 319.

While the Goodyear and McIntyre Machinery decisions are important in their own right, any claim that they changed the test for general jurisdiction over corporations is misplaced. The issue before the Court in McIntyre Machinery was whether a manufacturer whose product ended up in, and caused injury in, New Jersey could be sued in New Jersey under a “stream-of-commerce” theory. See 131 S. 2786, 2790. Notably, the defendant did “not have a single contact with New Jersey short of the machine in question ending up in this state.” Id. at 2790.

As a preliminary matter, any reliance on McIntyre as creating a new rule for general jurisdiction is misplaced because the case involved specific, not general, jurisdiction. While the Court discussed in passing the concept of general jurisdiction, it merely observed that the state of incorporation and principal place of business are “examples” of where the exercise of general jurisdiction would be proper.

A person may submit to a State’s authority in a number of ways. There is, of course, explicit consent. Presence within a State at the time suit commences through service of process is another example. Citizenship or domicile — or, by analogy, incorporation or principal place of business for corporations — also indicates general submission to a State’s powers. Each of these examples reveals circumstances, or a course of conduct, from which it is proper to infer an intention to benefit from and thus an intention to submit to the laws of the forum State. These examples support exercise of the general jurisdiction of the State’s courts and allow the State to resolve both matters that originate within the State and those based on activities and events elsewhere. By contrast, those who live or operate primarily outside a State have a due process right not to be subjected to judgment in its courts as a general matter.

McIntyre Machinery, 131 S. Ct. at 2787 (emphasis added) (citation omitted). It is unclear how anyone could come away from this excerpt with a rule that a corporation is subject to general jurisdiction in only in its state of incorporation or where it has its principal place of business.

In Goodyear, the Court addressed the issue of whether the fact that a small percentage of a foreign manufacturer’s tires were ultimately distributed in North Carolina could subject the manufacturer to general jurisdiction under a stream of commerce theory. There is, admittedly, a single sentence from the Goodyear decision in which the Court noted that the “paradigm” bases for general jurisdiction are the corporation’s principal place of business and state of incorporation. 131 S. Ct. at 2854. But that is not a statement that the exclusive bases for general jurisdiction are the location of the corporation’s principal place of business and its state of incorporation. Indeed, in direct contradiction to any new bright-line rule, the Goodyear Court went on to conduct a traditional general jurisdiction analysis and examine the defendant manufacturers’ contacts with North Carolina, despite the fact that the manufacturers were incorporated and had principal places of business in foreign countries. The Court ultimately concluded that the defendants’ attenuated contacts with the state “fall far short of the continuous and systematic general business contacts necessary to empower North Carolina to entertain suit against them on clams unrelated to anything that connects them to the State.” Id. at 2857. In short, it is inaccurate to claim that the Goodyear court established new rules for general jurisdiction. Rather, the Goodyear court simply applied well-established principles and reversed a decision by a state court that was far outside established, general jurisdiction precedent.

Post-Goodyear and McIntyre Machinery decisions only further confirm the fact that the systematic and continuous contacts test prevails to this day. No court has interpreted Goodyear or McIntyre Machinery as imposing a new bright-line rule. Indeed, since Goodyear and McIntyre Machinery, numerous courts have continued to conduct the “continuous and systematic” analysis in assessing general jurisdiction. See, e.g., Harrelson v. Seung Heun Lee, 2011 U.S. Dist. LEXIS 79383, at *18 (D. Mass. July 21, 2011) (citing Goodyear and then concluding that general jurisdiction was proper under a corporate veil-piercing due to the fact that corporations operated a number yoga centers in Massachusetts, which demonstrated systematic and continuous business activities in the state of Massachusetts); Arlington Industries v. Electric Custom Distributions, No. 3:10-cv-842, 2011 U.S. Dist. LEXIS 105009 (M.D. Pa. September 15, 2011) (citing Goodyear and then conducting traditional general jurisdiction analysis to see if a Texas corporation with its principal place of business in Texas could be subject to general jurisdiction in Pennsylvania); Francis v. Bridgestone Corp., No. 2010/30, 2011 U.S. Dist. LEXIS 72804, at *24-25 (D.V.I. July 6, 2011) (citing Goodyear and then recognizing that “[w]hen the claim is based on defendant’s non-forum related activity, the focus in determining jurisdiction is on the totality of the defendant’s activity within the jurisdiction, which must be ‘continuous and substantial’ to meet due process requirements.”); Austin Hardware and Supply, Inc., No. 11-cv-00485, 2011 U.S. Dist. LEXIS 88207, at *7-8 (W.D. Mo. Aug. 9, 2011) (concluding Tennessee corporation not subject to general jurisdiction because of a “lack of the systematic, on-going, continuous contacts required to establish general jurisdiction: SFI is not authorized to do business in the state of Missouri; it has no employees, representatives, or agents in Missouri; it does not own, lease or use any real property in the state of Missouri; and, it never had an employee or agent visit Austin Hardware’s offices or warehouse in Lee’s Summit, Missouri.”). In sum, Goodyear and McIntyre Machinery in no way created a new rule that corporations can only be sued in their states of incorporation or that state where their principal place of business is located. The law was and still remains that a corporation may be subject to general jurisdiction in any state with which it had continuous and systematic contacts.

by John Chapman

John Chapman is a licensed attorney with experience in complex commercial litigation (including securities fraud, RICO, shareholder oppression, and derivative actions) and personal injury litigation.