U.S. Supreme Court Rejects Manufacturer’s Arguments on Specific Jurisdiction
Atlanta, Ga. (March 30, 2021) - On March 25, 2021, the United States Supreme Court ruled in Ford Motor Co. v. Montana Eighth Judicial District Court that the connection between the Montana and Minnesota plaintiffs’ claims and Ford’s activities in those states is close enough to support specific jurisdiction. Thus, an auto manufacturer can be sued in a state over injuries from vehicle accidents occurring in the state despite the vehicles in question being manufactured and originally sold elsewhere.
For a corporation to be sued in a certain state, that corporation must be subject to either “general” or “specific” jurisdiction. General jurisdiction typically only exists in the state of incorporation or in the state where the corporation’s principal place of business is located, rendering the business essentially “at home” in those states.
Specific jurisdiction exists in a much narrower set of circumstances – only when the corporation has contacts with a state and the claim “arise[s] out of or relate[s] to” those contacts. Put differently, the injury itself must have some sort of connection with the corporation’s business activity in the state. The level of that connection has been the subject of debate across the country.
Ford Motor Co. v. Montana Eighth Judicial District Court presented the question of how and when the “arise out of and relate to” test for specific jurisdiction is satisfied. Put more precisely, do a corporation’s contacts with a state have to cause the injury in question or only relate to the injury? The interpretation of “arise out of or relate to” has been heavily litigated within the last decade and lower courts recently have struggled in applying the standard to global businesses whose international networks seemingly reach every state.
The Underlying Case
The Court heard two consolidated cases from two different states, each involving allegedly malfunctioning cars manufactured by Ford. Ms. Gullett was driving her Ford Explorer on a Montana road when the tread separated from a rear tire. The Explorer spun out, rolled off of the road, and Ms. Gullett died at the scene of the crash. In Minnesota, Mr. Bandemer was a passenger in his friend’s Ford Crown Victoria and suffered serious brain injury when his airbag failed to deploy after his friend rear-ended a snowplow. Both Ms. Gullet’s estate and Mr. Bandemer sued Ford alleging various theories of negligence and products liability.
Ford advertised and marketed its vehicles, including the Explorer and Crown Victoria models, in both states. However, in each suit, Ford argued that neither Montana nor Minnesota could exercise specific personal jurisdiction over it, because the particular vehicles in question were designed, manufactured, and sold in different states. Specifically, both the Explorer and the Crown Victoria that allegedly malfunctioned were brought into Montana and Minnesota through the stream of resales and relocations by consumers – not by Ford itself. Ford argued that a causal link was necessary for personal jurisdiction to exist and that a causal link only was present if the company had designed, manufactured, or sold the vehicles in question in the states where the suits were being brought.
The Court’s Analysis
The Court rejected Ford’s argument in an 8-0 opinion. The Court decided that “[w]hen a company like Ford serves a market for a product in a State and that product causes injury in the State to one of its residents, the State’s courts may entertain the resulting suit.”
The Court reasoned that both claims arose out of or related to Ford’s contacts with the state, citing that Ford advertises, sells, and services the models at issue in the states; encourages a resale market for its products (almost all Ford dealerships buy and sell used Fords); engages in wide-ranging promotional activities (a common one includes “[h]ave you driven a Ford lately?”); provides original parts to auto supply stores and repair shops across the country; and Ford’s network of dealers offer maintenance and repair services. Therefore, the “arise out of or relate to” element was satisfied because, even though the actual cars in question were brought into the states through third parties (individual consumers), Ford’s cars – including Explorers and Crown Victorias – are available for sale throughout both states. All of Ford’s contacts within the states, the Court said, provided a more than sufficient foundation to justify specific jurisdiction, because those contacts “related enough” to the suits.
The Court rejects Ford’s causal link approach by focusing on the “relate to” element of the “arise out of and relate to” test, but offered no real guidance on what the limits of this relatedness entail, only that it incorporates “real limits.” By doing so, the Court avoided the question of how to apply the traditional personal jurisdiction rules to modern day business activity and left it up to lower courts to figure out how to impose any real “limits” for cases involving global manufacturers conducting business in every state which may, unlike Ford, not encourage continuous resale of its products, but nevertheless find its products in states where it does not distribute or sell them. Specifically, the Court purposefully avoided addressing how the outcomes of the cases would have changed had Ford not sold, advertised, and serviced the Explorer and Crown Victoria models and original parts for them in Montana or Minnesota.
Ultimately, the Court failed to apply a workable standard for 21st century businesses operating in a global market. Manufacturers whose online advertisements and presence reach all of the United States should remain conscious of their distribution processes and networks if they want to avoid their products entering into certain states.
For more information on this decision, contact the authors of this alert or visit our Products Liability Practice page to find an attorney in your area.
Charles K. Reed, Partner
P. Michael Freed, Partner
Elizabeth Raines, Partner
Lillian Henry, Associate