Originally published in Law360, New York (July 18, 2011).
On June 27, 2011, the United States Supreme Court announced two decisions that clarify and limit the ability of plaintiffs, including corporate plaintiffs, to pursue products liability suits against foreign manufacturers in state courts under a stream-of-commerce theory of jurisdiction.
In Goodyear Dunlop Tires Operations SA v. Brown, No. 10-76, slip op. (U.S. June 27, 2011), and J. McIntyre Machinery Ltd. v. Nicastro, No. 09-1343, slip op. (U.S. June 27, 2011), the Supreme Court held that state courts could not properly exercise personal jurisdiction over foreign manufacturers that had not engaged in conduct that directly targeted markets in the forum states.
The Supreme Court¹s decisions in Goodyear and McIntyre have the potential to limit the liability of some U.S. corporations, but these decisions could expand the liability of others. For example, domestic corporations with foreign affiliates that engage in manufacturing may benefit from more limited exposure to product liability claims.
In contrast, some domestic companies may incur increased product liability risk because injured plaintiffs cannot sue foreign suppliers or manufacturers of defective or dangerous products in the U.S. Likewise domestic companies may lack a U.S. forum in which they can enforce indemnification agreements.
In light of these two Supreme Court decisions, companies that do business with foreign suppliers should have renewed focus on how they manage the product-related risks of their foreign supply chains. In addition, companies that operate foreign divisions or have foreign subsidiaries should consider how these decisions affect their own potential for supply-chain liability.
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