- Stream of Commerce Test Rejected by U.S. Supreme Court
- July 7, 2011 | Authors: Lorraine E.J. Gallagher; Francis P. Manchisi
- Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP - White Plains Office
In an opinion issued on June 27, 2011, in J. McIntyre Machinery Ltd v. Nicastro 564 U.S. -09-1343 (2011), the United States Supreme Court, in a plurality opinion, upheld the specific jurisdiction test set forth in International Shoe Co. v. Washington, 326 U.S. 310 (1945). According to the decision in J. McIntyre, simply putting a product in the stream of commerce is not enough to subject a company to the specific jurisdiction of a court. On the same day, the Court confirmed that general jurisdiction is appropriate only when a company has engaged in continuous and systematic activity within the forum state. In Goodyear v. Dunlop Tires Operations, S.A. v. Brown, a unanimous Court also stated that the stream of commerce inquiry does not apply to the general jurisdiction test.
In J. McIntyre, the plaintiff was injured while using a metal shearing machine manufactured by J. McIntyre, a metal shearing manufacturer incorporated in the United Kingdom and headquartered in England. Its only contact with New Jersey was the presence of one machine in the state. Although its employees attended conventions in the United States, none were held in New Jersey. The machines were distributed in the United States through an independent distributor. The New Jersey Supreme Court held that the New Jersey courts properly exercised jurisdiction over J. McIntyre because J. McIntyre knew or should have reasonably known its products could have been sold in any state in the United States and it failed to prevent the sale of its machines in New Jersey. Citing the “stream of commerce” test set forth in Asahi Metal Industry Co. v. Superior Court of Cal., Solano City., 480 U. S. 102, J. McIntyre was subjected to jurisdiction of the courts of New Jersey, despite the fact that it had never advertised in, sent goods to, or targeted the state of New Jersey.
The U.S. Supreme Court rejected the theory that specific jurisdiction can be based solely on a manufacturer placing its products in the stream of commerce. For a court to exercise specific jurisdiction, that company must purposefully avail itself of the benefits of doing business within the state. This means when a person is injured by use of the product, in addition to the company having placed that product into the stream of commerce, the company must have engaged in some other activity targeting that state.
In another decision also issued on June 27, 2011, the U.S. Supreme Court confirmed that in a North Carolina Supreme Court case, Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. - (2011), to be subject to general jurisdiction, a company must engage in continuous and systematic activities within the state. The U.S. Supreme Court unanimously agreed that the North Carolina Supreme Court improperly applied the specific jurisdiction test of stream of commerce to the general jurisdiction continuous and systematic test. When an injury occurs outside the state and the accident product was not sold into the state, specific jurisdiction does not exist over the defendant. Instead, the court must look to see if the company has sufficient contacts with the state to subject it to that state’s general jurisdiction. In Goodyear, when the accident occurred in Paris, the tire was manufactured in Turkey and never sold into the United States, and the foreign subsidiary companies did not have continuous and systematic contacts with North Carolina, North Carolina did not have jurisdiction over the foreign subsidiaries.