Courts Block "Stream of Commerce" Jurisidiction Claims

September 11, 2011

Topics: Defamation

Back in March, we reported on a North Carolina federal court's dismissal of a defamation claim brought against two out-of-state publishers and an out-of-state author based on a lack of personal jurisdiction.  In that case, Judge Louise W. Flanagan rejected plaintiff's argument that simply because a handful of books had been sold in North Carolina in the "stream of commerce," the court could exercise jurisdiction over the defendants.

Judge Flanagan wrote that:

"[t]o permit a state to assert jurisdiction over any person in the country whose product is sold in the state simply because a person must expect that to happen destroys the notion of individual sovereignties inherent in our system of federalism."

Since that decision, the "stream of commerce" argument has garnered substantial attention from the courts.  In June, the United States Supreme Court reversed 9-0 a decision by the North Carolina Court of Appeals that allowed a North Carolina state court to exercise jurisdiction over several foreign affiliates of Goodyear based on a stream of commerce argument much like the one Judge Flanagan rejected.  In that case, Goodyear Dunlop Tires Operations, S.A. v. Brown, Justice Ginsberg write for the Court:

Under the sprawling view of general jurisdiction urged by respondents and embraced by the North Carolina Court of Appeals, any substantial manufacturer or seller of goods would be amenable to suit, on any claim for relief, wherever its products are distributed.

Finally, in August, the North Carolina Business Court in Charlotte dismissed a libel claim brought in North Carolina against, among others, a TV network from Chennai, India called Sun TV.  The complaint alleged that Sun TV, which broadcasts its programs on Dish Network, caused defamatory statements about the plaintiffs to be broadcast to North Carolina subscribers.  Alleging that it owned no property in North Carolina, did no business in North Carolina, and did not contract with anyone in North Carolina, Sun TV moved to dismiss for lack of personal jurisdiction.

Citing Goodyear Dunlop Tires, the court rejected plaintiffs' argument that jurisdiction was appropriate because Sun TV broadcasts its signal knowing that it might reach Dish subscribers in North Carolina.  More specifically, the court held that while the "stream of commerce" argument had been applied in product liability cases, it had never been applied in North Carolina to a defamation action.  The court declined to be the first.

This flurry of personal jurisdiction cases has affirmed the principle that in defamation cases, plaintiffs cannot simply rely on the theory that the publication at issue "ended up" in the forum state.  This is an important defense for defamation defendants to remember.

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