Mon 8th Dec | 2014

Multi-National Corporations with Foreign Subsidiaries

General BY

One of the most frustrating aspects of litigating product liability cases stems from global, multi-national corporations, set up their corporate structure with foreign subsidiaries, to enable them to get a “pass” on being part of the lawsuit, and in turn, hiding from discovery.

Goodyear, for example, markets itself as one of the largest tire companies in the world, manufacturing its products in 51 facilities in 22 different countries. Its own literature touts it as employing 69,000 people around the world. In essence, Goodyear wants to hold itself out to the tire buying world as a worldwide powerhouse, but then asks courts to view its foreign subsidiaries as small and unrelated, and lacking minimum contacts with the United States.

In Florida, Venetian Salami v. Parthenais, 554 So.2d 499 (Fla. 1989) holds that the minimum contacts analysis is one that is separate and apart from a determination of whether the defendant falls within Florida’s long arm statute under §48.193.

Federal law applies the “stream of commerce” test for minimum contacts, meaning the flow of a manufacturer’s products into the forum bolsters an affiliation germane to specific jurisdiction. See, Goodyear v. Brown, 131 S. Ct. 2846, 2850 (2011). Florida, however, the law applies a “stream of commerce plus” test. The stream of commerce “plus” test requires not only a showing that the manufacturer could foresee that its product would be in a particular state and that it may derive some indirect economic benefit from the stream, but there must be proof that the non-resident defendant also engaged in some action purposefully directed toward the forum state. See, e.g., Kin Yong Lung Indus. Co., Ltd. v. Temple, 816 So.2d 663, 666 (Fla. 2nd DCA 2002).

There does seem to be a big difference between cases involving component manufacturers that would have no business “foreseeing” being sued in Florida, versus multi-national corporations like Goodyear, that are running a global business, and should fully expect to be hailed into court anywhere its products are sold.

Compare for example, Shin-Kobe Electric Machinery Co., Ltd. v. Rockwell, 750 So.2d 67 (Fla. 2nd DCA 1999), where the Japanese corporation that designed a defective battery, manufactured and sold it to another Japanese corporation, which had no knowledge that the second corporation would resell a forklift with one of its batteries in it to the United States’ market. Analogizing the facts there to the Supreme Court’s decision in Asahi Metal Industry Co. v. Superior Court of California, 107 S. Ct. 1026 (1987), the court found the Japanese corporation had no employees, agents or property in California, no business records, and did not conduct business nor did it advertise or solicit for business there.

There is a material difference between the activities of a non-global foreign corporation/component part manufacturer like Shin-Kobe, which merely manufactures products–or parts of products–that are ultimately imported without its direct knowledge, as compared to a self-proclaimed “one of the world’s largest tire companies” like Goodyear, that touts 69,000 employees and 51 facilities in 22 countries around the world.

An interesting Law Review article entitled “Mi Casa Es Su Casa: Enterprise Theory and General Jurisdiction Over Foreign Corporations After Goodyear Dunlop Tires Operations, S.A. v. Brown,” 63 S.C.L. Rev. 697 (Spring 2012) advocated for something called the “Single Enterprise Theory” of jurisdiction. This theory, which the Supreme Court in Goodyear v. Brown refused to address because of a failure to preserve the issue for review, is essentially a means to pierce the corporate veil for jurisdictional purposes only.

There, the author points out that for decades, courts across the country have found that participation in certain highly-integrated business enterprises operating within the forum state may subject each member, parent, or subsidiary, no matter where it is located, to general jurisdiction in the forum. It seems that that would be an even more enticing theory in cases where the accident actually occurs in the forum (in Goodyear v. Brown, the parents of two North Carolina children killed in a bus accident in France, brought suit against the foreign Goodyear entities in North Carolina).

According to the theory, a high level of economic integration between the parent and subsidiary creates a “jurisdictional merger,” because the parent and subsidiary are essentially part of a common enterprise relying on the efforts of both to carry out a common plan. Thus, there is jurisdiction over even the foreign defendants.

Perhaps one day, a Florida or another state’s court will latch on to the single enterprise theory (but injured Plaintiffs must raise it!), and will see that in weighing all of the equities, and in the interest of fairness, corporations such as Goodyear, should not be allowed to insulate their foreign subsidiaries, by pretending that they are tiny little companies across the ocean having nothing to do with the powerhouse multi-national corporations of which they are a part.