We blogged not too long ago about the two Supreme Court personal jurisdiction cases involving so-called "stream of commerce" jurisdiction. In the Brown case we pointed out how the lower court had unprecedentedly applied the "stream of commerce" to a case involving general jurisdiction.
Well, today the Solicitor General filed an amicus curiae brief for the United States in Brown, taking the defense side. Main points: (1) "stream of commerce"/"purposeful availment" is solely a test of specific jurisdiction and it was error to use it in a general jurisdiction case, SG br. at 16-20; (2) the "continuous and substantial" test requires something close to a corporation maintaining its principal place of business in the state, SG br. at 22-23; (3) in determining general jurisdiction, the residence of the plaintiff (and thus a state’s interest in providing a forum to residents) is irrelevant. SG br. at 29.
Jurisdiction is an awfully complicated subject, with a long and storied history, so I’ll put aside #1 and #3 and focus on #2.
Two pieces of background for non-legal readers. The Solicitor General is, quite literally, the United States’ lawyer. He (or, in the sole case of Elena Kagan, she) holds a special place in American law, since he, a political appointee, speaks on behalf of the President, and thus is typically the only non-litigant who gets a direct audience with the Supreme Court. Just in case the Justices forget just how important he is, he, alone among lawyers, is allowed to wear a formal morning coat at oral argument, tails and all. It thus means more when the Solicitor General makes an argument — he comes into the Court with more credibility, and greater interests at stake, than anyone else.
Personal jurisdiction is the bedrock foundation of all law; it determines the court’s power to hear a case, decide its outcome, and then enforce its judgment. Jurisdiction doesn’t ask if a court should hear a case, or the manner in which the case should be heard, but rather solely if the court can hear the case. No jurisdiction, no case. On the flip side, just because a court has jurisdiction to hear a case doesn’t mean that the court has to, or that a particular court is the right place to resolve the dispute. There are plenty of circumstances in which a court has jurisdiction and so can hear a case but nonetheless won’t hear it, like with forum non conveniens or improper venue.
Which brings us to Goodyear v. Brown. The case, filed in North Carolina state court, arises from a bus accident caused by the failure of a Goodyear tire.
Yes, that Goodyear, the one founded in Akron, Ohio in 1898. The one headquartered in the United States that sells millions of tires throughout the United States, including more than ten thousand to North Carolina every year.
Goodyear has grown in those 112 years, and so its primary "Goodyear U.S.A." company has a bunch of wholly-owned subsidiaries that manufacture its tires in other countries, like Luxembourg, Turkey, and France. The tire which failed, killing Brown, was manufactured by the Goodyear subsidiary in Turkey. The plaintiff sued Goodyear U.S.A. and the Turkish subsidiary in state court in North Carolina, where the plaintiffs resided.
The Turkish subsidiary objected to the jurisdiction of the North Carolina court, arguing, in essence, that it would be unfair to subject them to the laws of the United States. They lost in the North Carolina courts and so appealed directly to the United States Supreme Court.
Let’s be honest: the case seems ripe for a transfer of venue. The plaintiffs were from North Carolina, the defendants are all subsidiaries of Ohio-based Goodyear, but the accident occurred in Paris, France. The injury arose in France and it seems the bulk of the wrongful conduct (i.e., the improper manufacturing) occurred in Turkey.
But jurisdiction is another issue entirely. Did the Solicitor General really argue that the courts of the United States have no power over the wholly-owned subsidiaries of U.S. companies which conduct substantial business in the United States through their parent company? Read it and weep:
If mere “purposeful availment” of commercial opportunities in a particular State were sufficient to subject an enterprise to the general jurisdiction of that State’s courts, a corporation that sold its goods to an independent distributor, intending that they be resold in all 50 States, could potentially be brought to judgment in any State, on any claim against it, regardless of where in the world the claim arose. Such a result would be incompatible with “our traditional conception of fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945). In addition, by attaching disproportionate jurisdictional consequences to limited commercial undertakings directed at a particular State, that regime would create significant disincentives to geographic diversification of business.
There’s three problems with that analysis.
First, this case has nothing to do with "an independent distributor." It has to do with a U.S. company outsourcing manufacturing to wholly-owned foreign subsidiaries. There’s nothing "independent" about that; the foreign subsidiary exists solely to make money for the U.S. company.
Second, there’s nothing "unfair" or "unjust" about allowing a State to hold a company accountable when that company intentionally manufacturers products for use throughout the United States, including each State. The Solicitor General is arguing, in essence, that U.S. companies should be allowed to outsource their legal responsibility by outsourcing their work to wholly-owned foreign subsidiaries, subsidiaries that are then free from any liability in the United States since, well, you know, they shipped their products to "all 50 States" as opposed to particular States. It’s sophistry, pure and simple.
Third, there’s nothing "traditional" about allowing a U.S. company to avoid accountability to U.S. courts merely by outsourcing operations to wholly-owned foreign subsidiaries. Consider corporate citizenship in the context of diversity jurisdiction. Two-hundred-and-one years ago, the Supreme Court, in a unanimous opinion by Chief Justice Marshall, scoffed at the very notion that a corporation was a "citizen" entitled to diversity jurisdiction: “the term citizen ought to be understood as it is used in the constitution, and as it is used in other laws. That is, to describe the real persons who come into court, in this case, under their corporate name.” Bank of United States v. Deveaux, 5 Cranch 91–92 (1809).
Under "our traditional conception of fair play and substantial justice,” we look to "the real persons who come into court." In this case, the "real person" involved is Goodyear U.S.A., the 100% owner of its Turkish subsidiary — the subsidiary the Solicitor General claims is unaccountable to U.S. courts.
It seems the Solicitor General needs to rethink his understanding of "fair play and substantial justice." As Justice Story put it, "It would be strange, indeed, if parties could be allowed, under the protection of its forms, to defeat the whole objects and purpose of the law itself." Welch v. Mandeville, 14 U.S. 233, 236, 4 L. Ed. 79 (1816)(quote recently referenced here).