Protecting Overseas Suppliers From US Courts: Personal Jurisdiction, Market Selection, and Product Liability Risk

Litigation is nowhere near as common as companies suspect, but the risk is unquestionably there, and that is not going to change.

Can overseas companies participate in the US market without being fully subjected to its litigation? And if they must face the risk of litigation, can they limit that risk? There are increasing signs that the answer may be “yes,” which is good news for foreign manufacturers, component suppliers, and their legal decision-makers.

What Makes a Foreign Supplier Subject to US Personal Jurisdiction?

For overseas suppliers, exposure turns on two things: (1) whether a court can exercise personal jurisdiction over the supplier and (2), only if so, whether the plaintiff can prove a product‑defect claim. Without (1), there is no (2). Even if the supplier must hire counsel to raise its jurisdictional defense, the case cannot proceed without a finding of likely jurisdiction.

Jurisdiction depends on the connection the supplier has formed (or not formed) with the US state where the consumer resides. Jurisdiction arises in two ways: (1) being functionally local to the state (general personal jurisdiction), and (2) forming purposeful, forum‑directed relationships even if the company resides elsewhere (specific personal jurisdiction). These meaningful relationships must reflect deliberate action taken by the foreign company; consumer-initiated contacts carry less weight.

How Sales Channels Affect Jurisdiction: Direct Sales, Marketplaces, and Intermediaries

A supplier that sells directly to consumers, including through an online marketplace or sales platform, typically will be subject to suit in the consumer’s state, particularly if similar products reach multiple consumers there (the stream‑of‑commerce doctrine). A supplier that sells its product to retailers may be subject to jurisdiction in the consumer’s state; outcomes vary by jurisdiction, and courts disagree on whether additional, supplier‑specific forum targeting is required. But even without supplier-consumer contact, retailer agreements often require contractual indemnification. This shifts defense and settlement costs from the retailer to the supplier, making the supplier’s lack of direct connection to the consumer a moot point.

The Role of Corporate and Logistics Structuring 

But overseas suppliers have more concrete ways to protect themselves. The US Supreme Court has recognized that foreign companies may structure their affairs to influence where they can be sued. 

Suppliers have various ways to demonstrate this intent. For example, the supplier that designs a product need not be the same company that manufactures that product or distributes that product. In addition, US courts ordinarily do not hold parent companies liable for products of their subsidiaries; compartmentalization demonstrates intended separation consistent with US corporate law. Piercing the veil of a corporation is exceptional and requires substantial misconduct. Product shipping terms present additional avenues for supplier protection. 

Courts assess corporate separateness and forum‑directed conduct. Aligning functions with that framework make it harder for courts to find that the supplier has targeted the consumer’s state.

With all these tools available, overseas suppliers should be consulting experienced product liability and corporate counsel about how their US operations can take advantage of them.

Product Diversion and Misuse: Protection From Black-Market Sales 

Overseas suppliers that sell exclusively to commercial customers are not automatically subject to suit in that state when products are diverted into consumer channels. Although some courts have insisted that these suppliers are still subject to jurisdiction, the trend seems to be moving in the opposite direction. First the Ninth Circuit, and now the Seventh and Fifth Circuits, have all held that suppliers who sell to a market are not automatically subject to litigation when their products are diverted in that same state for improper purposes. (These three circuits govern states on the West Coast, the Upper Midwest, and the Deep South, respectively.) As always, fact patterns vary and can drive different outcomes.

Most product liability litigation does not involve that level of product misuse, but the takeaway is clear. Suppliers who carefully select their markets in the United States, and how they wish to service those markets, fare better than those who do not.

Conclusion: Advance Planning Makes Overseas Suppliers a Harder Target

The bottom line is that while American litigation is always a risk, overseas suppliers have real options to manage those risks. No company structure or decision can guarantee immunity, but advance planning can make the supplier a more difficult target for litigation.