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United States of America > New York > Litigation Dispute resolution > Advisory > Article > Supreme Court “Homes” In On General Jurisdiction

Article: Supreme Court “Homes” In On General Jurisdiction

In Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Supreme Court, in a unanimous decision by Justice Ginsburg, held that a foreign corporation is subject to general jurisdiction in a forum only if it is “at home” there. The Court’s decision in Daimler AG will make it more difficult for plaintiffs to bring suits against foreign corporations in forums where the claims do not arise out of the corporation’s activities in that forum. This result is also consistent with the Court’s recent decisions denying courts the ability to hear cases where the events or harmed parties have no relation to the United States. See, e.g., Kiobel v. Royal Dutch Petroleum Co., 569 U.S. ---, 133 S. Ct. 1659 (2013); Mohamad v. Palestinian Authority, 566 U.S. ---, 132 S.Ct. 1702 (2012). Moreover, while Daimler AG focused on the question of general jurisdiction for foreign corporations, the Court’s decision applies equally to U.S. corporations.

In Daimler AG, a group of 22 Argentinian residents filed suit in the Northern District of California against DaimlerChrysler Aktiengesellschaft (“Daimler”), the German company headquartered in Stuttgart that manufactures Mercedes-Benz vehicles. The suit sought to hold Daimler vicariously liable for the actions of its Argentinian subsidiary Mercedes-Benz Argentina (“MB Argentina”), alleging that MB Argentina worked with Argentinian state security forces to “kidnap, detain, torture, and kill” plaintiffs and their relatives during the military dictatorship in Argentina from 1976 through 1983 known as the “Dirty War” Daimler AG, 134 S. Ct. at 751. The plaintiffs filed claims under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350 and the Torture Victim Protection Act of 1991 (“TVPA”), 106 Stat. 73, and also for wrongful death and intentional infliction of emotional distress under the laws of California and Argentina.

Daimler moved to dismiss the case due to a lack of personal jurisdiction. In opposition, plaintiffs argued that Daimler had a presence in California, and, alternatively, that jurisdiction over Daimler was appropriate based on the California contacts of Mercedes-Benz USA, LLC (“MBUSA”), a Daimler subsidiary incorporated in Delaware with its principal place of business in New Jersey. The district court granted Daimler’s motion, finding that Daimler’s contacts with California were insufficient to assert jurisdiction and that plaintiffs failed to demonstrate that MBUSA acted as Daimler’s agent. The appeal addressed only the issue of agency. After initially affirming that plaintiffs had not established that MBUSA acted as Daimler’s agent, the Ninth Circuit granted rehearing and subsequently found that plaintiffs satisfied the agency test, given that MBUSA’s services were “important” to Daimler. The Supreme Court granted certiorari to decide whether “Daimler is amenable to suit in California courts for claims involving only foreign plaintiffs and conduct occurring entirely abroad.”

The Court began by reviewing its decisions regarding personal jurisdiction in Pennoyer v. Neff, 95 U.S. 714 (1878), International Shoe Co. v. Washington, 326 U.S. 310 (1945), and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ---, 131 S. Ct. 2846 (2011). International Shoe provided a distinction between specific jurisdiction, where the in-state activities of a defendant also give rise to the liabilities the defendant is sued on, and general jurisdiction, where a corporation’s contacts within a state are so substantial to justify suit against the corporation in that state on causes of action arising from dealings distinct from the corporation’s contacts. In its few decisions after International Shoe discussing general jurisdiction, the Court has “declined to stretch general jurisdiction beyond limits traditionally recognized.” Daimler AG, 134 S. Ct. at 757-58. In Goodyear, the Court’s most recent decision on general jurisdiction, the Court articulated the standard that a foreign corporation must be “at home” in a state to be subject to general jurisdiction.

Addressing the plaintiffs’ agency theory, the Court noted, that although some Courts of Appeals have held that a “subsidiary’s jurisdictional contacts can be imputed to its parent only when the former is so dominated by the latter as to be its alter ego,” the Ninth Circuit had adopted a “less rigorous test” based on agency. Id. at 759. The Court rejected the Ninth Circuit’s agency theory premised on the “importance” of MBUSA’s services to Daimler, as the theory provided no limiting principle as it “appear[ed] to subject foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate.” Id. at 760.
Instead, the Court proceeded on the assumption that MBUSA was at home in California and that MBUSA’s contacts could be imputed to Daimler but determined that the proper test for general jurisdiction over Daimler is whether the contacts of Daimler itself would make it “at home” in California. As found in Goodyear, the paradigmatic locations for general jurisdiction of a corporation are the corporation’s place of incorporation and principal place of business. While these two examples are not the only locations where a foreign corporation could be at home, it would take an “exceptional case” to find another location. The Court rejected plaintiffs’ argument that general jurisdiction could be found in “every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business.’” Id. at 761. The Court cautioned that if Daimler’s contacts in California could be construed to allow jurisdiction, then Daimler could be deemed to be “at home” in any number of U.S. states in which MBUSA had “sizable” sales. Thus, given the lack of the traditional bases for locating a corporate home in California for Daimler, the Court held that the Ninth Circuit erred in concluding that Daimler was subject to general jurisdiction in California, even with MBUSA’s contacts attributed to Daimler.

The Court also expressed concerns about the effect on international comity of a finding of jurisdiction. Quoting the amicus brief of the United States, Justice Ginsburg acknowledged that “foreign governments’ objections to some domestic courts’ expansive view of general jurisdiction have in the past impeded negotiations of international agreements on the reciprocal recognition and enforcement of judgments.” Id. at 763. The Court further noted that the limits placed on general jurisdiction are in line with the Court’s recent decisions narrowing the reach of U.S. law on foreign entities for actions taking place outside the United States. See, e.g., Kiobel, 569 U.S. ---, 133 S. Ct. 1659 (ATS does not apply to events outside the United States); Mohamad, 566 U.S. ---, 132 S.Ct. 1702 (TVPA only applies to natural persons).

Notably, the Court’s decision assumed that MBUSA would qualify as having its “home” in California, as Daimler had never objected to the assertion of general jurisdiction over MBUSA. The Court’s clarification of the Goodyear holding that a corporation’s home is its principal place of business or place of incorporation (subject to an exceptional case), however, suggests that the parties wrongly assumed that general jurisdiction could be exercised over MBUSA in California. Under the Court’s reasoning, even though MBUSA had multiple California-based facilities and sizable sales in California, MBUSA was incorporated in Delaware and its principal place of business was in New Jersey, and as such MBUSA could not be at home in California.

In an opinion concurring in the result, Justice Sotomayor concluded that the majority improperly failed to focus on the lack of relationship between the lawsuit and California. Instead, Justice Sotomayor argued that the Court should have decided on the “far simpler ground that, no matter how extensive Daimler’s contacts with California, that State’s exercise of jurisdiction would be unreasonable given that the case involves foreign plaintiffs suing a foreign defendant based on foreign conduct, and given that a more appropriate forum is available.” Daimler AG, 134 S. Ct. at 764.

Last Update: 2014-Feb-23 Charles E. “Trip” Dorkey III - Dentons
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Author: Charles E. “Trip” Dorkey III
Law Firm: Dentons
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