Foreign Corporations Score Big Win in Corporate Court

In a unanimous decision issued today, the Supreme Court limited the ability of individuals harmed by defective foreign products to hold manufacturers accountable for their negligence.

Two 13-year-old children from North Carolina died in a bus accident while on a soccer trip to Paris, France. French investigators determined that a defective Goodyear tire on the bus caused the accident. The children’s surviving relatives sued three foreign Goodyear affiliates in a North Carolina court. The three affiliates collectively export at least 44,000 tires to North Carolina each year. The North Carolina Court of Appeals determined that Goodyear’s highly organized international distribution process constitutes such a purposeful injection into North Carolina’s stream of commerce that the state’s courts have general jurisdiction over the companies. As a result, the court held, the surviving family members should be allowed to sue the companies in North Carolina.

The Supreme Court reversed and held that the Goodyear affiliates’ lack of a connection to North Carolina precluded state courts from exercising general jurisdiction. The Court stated that the companies’ connections to the state “fall far short of the continuous and systematic general business contacts necessary to empower North Carolina to entertain suit against them on claims unrelated to anything that connects them to the State.” As a result, the companies will be allowed to make profits in a state, but individuals harmed by their negligence will be incapable of seeking compensation from the companies in that state. It will now be easier for sophisticated foreign companies whose products reach into all regions of the U.S. can now escape justice for the injuries their defective products cause.