Daimler – Implications on Personal Jurisdiction

Earlier this year, the Supreme Court of the United States rendered an Opinion in Daimler AG v. Bauman, ____ U.S. ____, 134 S.Ct. 746 (2014), that came as something of a surprise for those familiar with the facts and procedure of the case and that may constitute a sea change in where corporations are subject to personal jurisdiction in this case.

First, a quick primer:  put simply, defendants may only be sued in places where the court has what is called “personal jurisdiction” over them.  In this instance, “jurisdiction” refers to a court’s authority and ability to require someone to participate in a case (or face default judgments).  There are two categories of personal jurisdiction, specific jurisdiction and general jurisdiction.  “Specific jurisdiction” refers to cases where a defendant is being sued for actions occurring in the state or for causes of action that arise from the defendant’s actions in the state (a car accident that occurs in the state or a defendant health care company being sued for medical malpractice in the state, for example).  Specific jurisdiction was not at issue in the case.  “General jurisdiction” refers to instances where a defendant has such an overwhelming presence in a state and conducts so much business or activity in a state that it is fair to require the corporation to defend itself against any lawsuit filed there, even if the acts at issue in the case occurred well outside the state (such as a railroad employee who was injured in Nebraska filing a suit against the railroad in Montana or an injured motorist bringing suit in Missouri for a motor vehicle accident involving a multi-state trucking company that occurred in Texas, for example).  For decades, jurisdiction has been virtually synonymous and inexorably linked with the corporation’s contacts with the state, i.e., if a company’s contacts with a state were sufficiently continuous and systematic, the corporation was considered to have significant enough contacts with a forum state to subject it to suit there for any type of lawsuit even if the actions giving rise to the suit occurred in other states and had nothing to do with the company’s actions in the forum state.  Generally, doing business in the state satisfied the test, so a company essentially could be sued in any state in which it regularly did business or attempted to do business.  Daimler AG expressly rejected the concept of continuous and systematic contacts for general jurisdiction, and it replaced it with a far more restrictive concept of general personal jurisdiction.

In Daimler AG, twenty-two Argentineans sued DaimlerChrysler Aktiengesellshaft (“Daimler”), a German company that was the predecessor to Daimler AG prior to a 2007 corporate restructuring that did not affect the case that was filed in 2004, for crimes allegedly performed by Mercedes-Benz Argentina, a subsidiary of Daimler in Argentina that allegedly participated in state-sponsored murders, torture, and kidnapping, some of which allegedly involved the relatives of the plaintiffs.  The plaintiffs filed suit in federal court in California where another subsidiary, Mercedes-Benz USA, LLC (“MBUSA”), distributes automobiles, and the plaintiffs predicated jurisdiction for Daimler in California on MBUSA’s actions in California.  In other words, they sought to hold one company liable for the actions of a subsidiary by filing suit in a state ostensibly available to them based on the actions of another subsidiary.

The Daimler AG Court rejected the concept of systematic and continuous contacts as it applied to general personal jurisdiction.  Referencing the seminal case of International Shoe Co. v. Washington, 326 U.S. 310 (1945) as well as the recent Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___, 131 S.Ct. 2846 (2011), the Court reversed decades of lower court jurisprudence and practice by holding that the test to determine whether a state has personal jurisdiction over a corporation based upon general jurisdiction is not whether the corporation has continuous and systematic contact with the state but whether that contact is so continuous and so systematic as to render the corporation “at home” in the state, emphasizing that being a resident (“at home”) is the relevant focus and which now seems the sine qua non of general jurisdiction over a corporation.  The Court then went on to hold that, absent the most extraordinary of circumstances, a corporation is only “at home” in the state where it is incorporated and the state where it has its principal place of business.  Consequently, it now appears that the only places where corporations may be amenable to suit based upon general jurisdiction are the states where they incorporated and where their principal places of business are located, thus freeing all foreign corporations from any liability that occurred outside the United States and subjecting them to liability only in fora where their actions in the fora gave rise to the liability (i.e., where they may be subject to specific jurisdiction).

The Court’s ruling came as something of a surprise, considering the facts and the procedural posture of the case presented to it.  The litigants and those watching the case expected a ruling based on whether the California court had jurisdiction over Daimler based only upon MBUSA’s actions because the California court’s jurisdiction over Daimler was never in question prior to the Court’s ruling.  In fact, the defendant conceded in the lower courts that Daimler AG was subject to general personal jurisdiction in the lower courts; after the Court’s ruling, it was not.  As Justice Sotomayor pointed out in her concurrence in the result, the Court’s rationale and the position upon which it based its decision were neither argued nor ruled upon below.  Instead, the issue was raised for the first time in a footnote to Daimler’s Brief.  Moreover, Certiorari (that is, the Supreme Court’s decision to hear the case) was granted on the question of “whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum state.”  Even Justice Ginsburg, the Opinion’s author, stated that the case dealt with the relatively narrow question of a United States court’s authority extended to claims involving only foreign litigants based on conduct that occurred outside the United States.  Needless to say, the ruling that was rendered came as quite a shock for those who were expecting an answer to a much narrower question than the one that the Court decided to answer.

Although the facts of the case may seem extreme (citizens of one foreign country suing a company based in another foreign country for claims of human rights violations that occurred outside the United States during the 1970s), the ruling has an impact upon cases with decidedly more commonplace sets of facts and litigants.  Plaintiffs have routinely filed suits against corporations in states that were perceived to have more pro-plaintiff juries, where rules of civil procedure did not require unanimous juries, or where the plaintiffs felt that they had some other advantage.  After Daimler AG, it appears that cases filed relying upon a court’s general personal jurisdiction over the defendant (i.e., cases where the complained-of actions did not occur within the state or arise out of actions performed in the state) may only be filed in the state where the corporation has its principal place of business or where the corporation is incorporated.

Despite its Ginsburg authorship, this is another very pro-business ruling from the Roberts Court.

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*This post was originally published on December 3, 2014