Goodyear and Hertz: Reconciling Two Recent Supreme Court Decisions

Abstract

In June 2011, the U.S. Supreme Court handed down its opinion in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011) — its first decision regarding general personal jurisdiction in almost three decades. Rather than clearly fleshing out the “continuous and systematic” contacts test used to determine in which states a corporation is subject to general jurisdiction, the Court instead announced a new and somewhat vague test: “A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” In comparison to the Court’s notorious decision regarding specific jurisdiction in Goodyear’s companion case, J. McIntyre Machinery Co. v. Nicastro, the “essentially at home” standard received minimal attention. However, it is imperative that the lower courts, litigators, and potential litigants know what that test means.

This article proposes the following interpretation of Goodyear: A corporation is “at home” only in its state of incorporation and in the one state where its principal place of business, or nerve center, is located. In the event the corporation’s headquarters is located outside of the United States, it is “essentially at home” in the one state, if any, in which it has comparable administrative and executive contacts (i.e., a pseudo-nerve center). This interpretation gives meaning to the Court’s express language, which demonstrates its intent to allow for the exercise of general jurisdiction over a corporation where it is domiciled — i.e., in its state of incorporation and the state in which it has its principal place of business. It also properly reconciles Goodyear with the Court’s 2010 decision in Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010) — in which it determined that a corporation’s principal place of business for purposes of diversity subject matter jurisdiction is located at its nerve center — because the Court in both instances was trying to determine in which state a corporation has such significant contacts that it can be forced to litigate there without being subject to local prejudice. Furthermore, this interpretation explains the Court’s use of such a vague standard by allowing for the exercise of general jurisdiction over a corporation that is not domiciled in the United States but that does have contacts with a particular state that are comparable to having a principal place of business there. Finally, this interpretation promotes not only fairness and predictability for the defendant — central concerns when exercising personal jurisdiction and applying the Due Process Clause — but also simplicity and administrative efficiency.

Keywords: civil procedure, personal jurisdiction, general jurisdiction, jurisdiction