WASHINGTON (June 27, 2011)—State courts can't hold foreign corporations liable in accidents that occur out of state without proof that the companies do “continuous and systematic” business in the state, the U.S. Supreme Court ruled.
A North Carolina state court had ruled that plaintiffs could sue Goodyear's subsidiaries in France, Luxembourg and Turkey, as well as Goodyear itself, in a wrongful death case involving two 13-year-old boys who were killed in a bus accident near Paris, France, in April 2004. The boys' relatives claimed the failure of a Goodyear bus tire made in Turkey caused the accident.
The North Carolina Court of Appeals upheld the lower court, despite Goodyear's contention that its foreign subsidiaries should be exempt from the lawsuit because they have no business ties to the state. Goodyear did not contest the jurisdiction of the North Carolina courts over the parent corporation based in Akron.
Because a small number of the tires made by the foreign subsidiaries reach North Carolina through the stream of commerce, North Carolina courts have standing to hear lawsuits against them, the trial and appeals courts ruled. In a 9-0 decision written by Justice Ruth Bader Ginsburg, however, the Supreme Court reversed the state courts.
“A connection so limited between the forum and the foreign corporation, we hold, is an inadequate basis for the exercise of general jurisdiction,” Ginsburg wrote. “Such a connection does not establish the 'continuous and systematic' affiliation necessary to empower North Carolina courts to entertain claims unrelated to the foreign corporation's contacts with the state.”
Goodyear said it was pleased with the ruling.
“The Supreme Court agreed with Goodyear that there was no basis for jurisdiction over the foreign affiliates,” the tire maker said.