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Hauling Foreign Corporations into American Courts in the 21st Century

The following is a guest blog post by Myanna Dellinger, a law professor at Whittier School of Law.

For years, the standard for bringing foreign corporations into court in the United States has been notoriously opaque. Personal jurisdiction could only be exercised over the corporation if it had either limited, but specific, or a large number of “continuous and systematic” contacts with the desired forum state. See, e.g., Helicopteros Nationales v Hall (1984) 466 US 408,80 L Ed 2d 404, 104 S Ct 1868; Perkins v Benguet Mining Co. (1952) 342 US 437, 90 L Ed 2d 485, 72 S Ct 413. The Supreme Court is now resolving what the latter amorphous standard really means.

Is it enough if a foreign corporation asks its U.S.-based distributor to sell as many products in the U.S. as possible without targeting any specific state? (McIntyre Machinery v Nicastro, Sept., 28, 2010, No. 09-1343) 177 L Ed 2d 1151, 131 S Ct 62.) Can foreign subsidiaries of American parent companies be sued in the U.S. based on activities taking place entirely outside the U.S. just because the parent company is located in the U.S.? (Goodyear v Brown, Sept. 28, 2010, No. 10-76) 177 L Ed 2d 1152, 131 S Ct 63.) Is Internet activity conducted in a desired forum state enough, and if so, what type of interactivity is required? (Nicastro, supra).

These issues are important for private plaintiffs injured either on U.S. soil or overseas by foreign-made products. Such plaintiffs may want to bring suit domestically where personal injury law is likely to be more advantageous to plaintiffs than in foreign legal systems. Conversely, these issues are also important for counsel seeking to limit the exercise of jurisdiction over their foreign-based corporate clients.

The Court seems unlikely to allow jurisdiction to be exercised over small and medium-sized foreign companies whose products merely end up in the U.S. through American distributors. The Court will likely require some additional purposeful conduct showing the intent to sell products in this country such as visits to American trade shows as well as minimum contacts with the desired forum state.

Internet-based activity will likely be held to allow personal jurisdiction if, for example, the foreign company has a website allowing U.S-based customers to buy products online, but not if the website is more like a “billboard” with only a phone number and no online order form. This would uphold the Ninth Circuit’s law governing personal jurisdiction over foreign companies in e-commerce cases. Cybersell v Cybersell (9th Cir. 1997) 130 F3d 414.

Similarly, the Court is unlikely to allow jurisdiction over a foreign company just because its parent company is located in the U.S. if the foreign company has not conducted any activities here. The justices appear concerned that allowing jurisdiction over a broad range of cases would lead other countries to reciprocate by aggressively asserting jurisdiction over American companies as well, which Justice Scalia called “a little scary.”

On personal jurisdiction issues, go to CEB’s California Civil Procedure Before Trial, chap 6.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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