Courts in the United States frequently preside over cross-border litigation involving foreign parties and activities that occurred, in large part, outside of the country. But in recent years, the U.S. Supreme Court has led the charge in pulling back on the reach of U.S. courts' jurisdiction over foreign companies. As a result, cross-border disputes that played out in U.S. courts in the past have become more susceptible to jurisdictional challenges from foreign defendants hoping to avoid litigating in the United States.

Personal Jurisdiction Threshold

When faced with a lawsuit in the United States, the first issue a foreign company defendant (i.e., incorporated and/or based outside of the U.S.) should consider is whether the court has grounds for exercising personal jurisdiction over the defendant. A court may exercise personal jurisdiction over a foreign defendant only if federal due process and the forum state's “long-arm” statute are satisfied. Long-arm statutes set out the circumstances under which a state's courts may exercise personal jurisdiction over an out-of-state defendant. However, since long-arm statutes often reach as far as federal due process allows, personal jurisdiction typically focuses on the due process requirement of whether the defendant purposely established “minimum contacts” with the forum state.

The minimum contacts analysis is further analyzed under two separate theories: general jurisdiction and specific jurisdiction. Specific jurisdiction is dispute-specific and requires that the claims at issue arise from or relate to the defendant's activities in the forum state. General jurisdiction is dispute-blind in that it does not require the claims to be related to the defendant's activities in the forum state. But general jurisdiction involves a more demanding minimum-contacts analysis than specific jurisdiction because it requires that the defendant's activities in the forum state be so “continuous and systematic” that the defendant is “at home” in the forum.

Recent Limitations on the Reach of General Personal Jurisdiction

Although the minimum contacts analysis is a fact-intensive determination that depends on the circumstances of each case, U.S. courts appear to be shrinking the scope of personal jurisdiction over foreign defendants in cross-border disputes. The U.S. Supreme Court has led this trend by weighing in on jurisdictional issues several times in recent years and, in doing so, limiting the reach of U.S. courts.

In 2011, the U.S. Supreme Court struck down general jurisdiction over foreign defendants in Goodyear Dunlop Tires Operations S.A. v. Brown. The court reaffirmed the principle that general jurisdiction over a foreign corporation requires contacts with the forum state that are so continuous and systematic as to render the corporation “at home” in the forum. Of interest to foreign companies manufacturing and selling goods in the U.S., the Goodyear court specifically held that the flow of a foreign corporation's products into the forum state alone cannot support general jurisdiction over the corporation in that state.