Re-examining New York's law of personal jurisdiction after Goodyear Dunlop Tires Operations S.A. v. Brown and J. McIntyre Machinery Ltd. v. Nicastro.

Author:Chase, Oscar G.

INTRODUCTION I. BACKGROUND II. GENERAL JURISDICTION A. The Supreme Court Cases: Goodyear, Helicopteros, and Perkins B. General Jurisdiction in New York III. SPECIFIC JURISDICTION A. The Supreme Court: Specific Jurisdiction and Due Process 1. Basic Doctrine 2. The Stream-of-Commerce Cases: Nicastro and Asahi B. Specific Jurisdiction in New York 1. 302(a)(1): "[T]ransacts any business within the state or contracts anywhere to supply goods or services in the state" 2. 302(a)(2): "[C]ommits a tortious act within the state" 3. 302(a)(3)(i): "[C]ommits a tortious act without the state causing injury to person or property within the state ... if he ... regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state" 4. 302(a)(3)(ii): "[C]ommits a tortious act without the state causing injury to person or property within the state, ... if he ... expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce" 5. 302(a)(4): "[O]wns, uses or possesses any real property situated within the state" CONCLUSION INTRODUCTION

On June 27, 2011, the Supreme Court announced two decisions striking down state court rulings because they violated the constitutional limits governing the exercise of jurisdiction over foreign entities: Goodyear Dunlop Tires Operations, S.A. v. Brown, (1) in which the Court held that North Carolina had contravened the rules cabining "general" jurisdiction, (2) and J. McIntyre Machinery, Ltd. v. Nicastro, (3) in which the same fate befell New Jersey's attempt to rely on "specific" jurisdiction. (4) The two cases are significant not only because they reversed the state courts but also because over twenty years had passed since the Court had last decided a personal jurisdiction case, (5) leaving contemporary state courts to interpret an increasingly obsolete doctrine when dealing with relevant constitutional challenges. In the context of the present article, we address the important question: How do--or should--these cases affect New York's jurisdiction jurisprudence? In this article, we first describe the background cases that have informed the development of contemporary doctrines of personal jurisdiction. Second, we discuss the impact of Goodyear, pointing out that a reasonable reading of the case would require some restriction of New York's general jurisdiction over corporations. Third, we read the tea leaves left in the brew of the three different opinions--none of which commanded a majority--in Nicastro. We close with a conclusion and some observations.

While we believe that each of the cases will require some change in the law of personal jurisdiction of New York, the judicial response to them depends upon not only the case being applied--Goodyear or Nicastro--but also on the New York court to which the issue is presented. When faced with arguably conflicting rulings, the supreme courts and the appellate divisions should err on the side of following Court of Appeals precedent as opposed to that of the Supreme Court of the United States. This is because those courts are bound by the decisions of the Court of Appeals as well as by those of the United States Supreme Court and therefore must be extremely cautious in, as it were, "overruling" the Court of Appeals upon the authority of the Supreme Court unless the latter is crystal clear. The Court of Appeals has more freedom to adjust its own jurisprudence in the light of Supreme Court rulings and should not shrink from overruling its own precedents if doing so arguably would comport better with either of the cases discussed. In sum, we think that New York may no longer exercise general jurisdiction over a non-resident corporation unless, at a minimum, it operates a substantial staffed office in New York for an extended period through which it furthers its business interests. Further, although we do not endorse this view, it would be reasonable to read Goodyear to prohibit general jurisdiction based on a staffed office unless that office was the corporation's principal place of business or something close to it. As to Nicastro, we think that section 302(a)(3) of the Civil Practice Law and Rules ("CPLR") must be read more narrowly than some New York cases have done. Courts are well advised to require that the defendant specifically targeted New York as a product destination and that the number or value of the products reaching New York be truly substantial.


    The Supreme Court set out the basic modern framework for both general and specific jurisdiction over individuals and corporations in International Shoe Co. v. Washington. (6) International Shoe held that the long-standing requirement that a person or corporation be physically present in the forum state to be subject to its jurisdiction should be replaced by a more open-ended approach that demanded only that the defendant, if not physically present, have "minimum contacts" with the forum state such that "the suit does not offend 'traditional notions of fair play and substantial justice.'" (7) With respect to corporations, the Court acknowledged that "presence" within a state is a legal fiction that is based on the activities of the corporation's agents acting on its behalf. (8) The concept of "presence" thus "merely ... symbolize[d]" the corporation's having sufficient activities within the state to make it subject to suit without a federal due process violation. (9) The Court distinguished cases in which the cause of action arose from the corporation's activities in the state from those in which the claim was "unconnected with the activities there." (10) The Court found that the activities of defendant International Shoe Company within the State of Washington were both "systematic and continuous" and gave rise to the lawsuit--in such a case, jurisdiction was certainly proper. (11) The Court also discussed the conditions of jurisdiction should a company's activities meet only one of these criteria. (12) It did not lay down any bright lines but rather described illustrative cases, without specifically endorsing any. (13) The Court observed, "there have been instances in which the continuous corporate operations within a state were thought 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." (14) This is now referred to as general jurisdiction. (15) And "single or occasional acts" within a state, though not continuous and substantial, depending on their "nature and quality and the circumstances of their commission, may be deemed sufficient to render the corporation liable to suit." (16) This is now referred to as "specific jurisdiction." (17)


    1. The Supreme Court Cases: Goodyear, Helicopteros, and Perkins

      Goodyear, the United States Supreme Court's 2011 general jurisdiction case, arose out of a bus accident in France in which two teenage boys were killed. (18) The boys' parents alleged a defective tire, manufactured in Turkey by a foreign subsidiary of the Goodyear Tire and Rubber Company ("Goodyear USA"), had caused the accident. (19) They sued Goodyear USA and three foreign subsidiaries in a North Carolina state court. (20) Goodyear USA did not contest jurisdiction, but its subsidiaries did. (21) The accident did not occur in North Carolina, nor was the tire manufactured or sold there (rather, all events relating to the suit occurred overseas), so North Carolina did not have specific jurisdiction to hear the case; the North Carolina courts, however, had ruled that the subsidiaries were subject to general jurisdiction in the state. (22) Through a distribution network, thousands of tires manufactured by these companies had ended up in North Carolina, and the North Carolina Court of Appeals had upheld the finding of general jurisdiction on a stream-of-commerce theory--finding that these companies had "placed their tires 'in the stream of interstate commerce without any limitation on the extent to which those tires could be sold in North Carolina.'" (23)

      Reversing, the Supreme Court held that North Carolina lacked general jurisdiction over the three foreign companies. (24) In doing so, the Court described its two prior general jurisdiction cases, Perkins v. Benguet Consolidated Mining Co. (25) and Helicopteros Nacionales de Colombia, S.A. v. Hall. (26)

      In Perkins, Benguet Consolidated Mining Company ("Benguet"), a Filipino company, was sued in an Ohio state court by a stockholder seeking unpaid dividends and damages. (27) The Ohio courts had held that federal due process forbade the exercise of jurisdiction. (28) The Supreme Court vacated this judgment, holding that Benguet could be subject to general jurisdiction in Ohio consistent with the Constitution, and remanding for Ohio to decide under state law if it would choose to exercise such jurisdiction. (29)

      Benguet, formed in the Philippine Islands, operated silver and gold mines in and only in the Philippines. (30) However, during the Japanese occupation of the Philippines, Benguet's overseas activities had halted, and its president/general manager/principal stockholder returned to his home in the forum state. (31) There, he kept an office in which he conducted the company's limited business: maintaining files, holding directors' meetings, and writing salary checks. (32) He maintained two company bank accounts at one Ohio bank and used another for stock transfers. (33) "Thus he carried on in Ohio a continuous and systematic supervision of the necessarily limited wartime activities of the company." (34) This was constitutionally sufficient for the exercise of jurisdiction, although the claim did not arise from the defendant's contacts with the forum state. (35)

      Construing Perkins, the Goodyear Court...

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