Caseflicks

Supreme Court of the United States • 2014

Daimler AG v. Bauman

134 S. Ct. 746 | 187 L. Ed. 2d 624 | 2014 U.S. LEXIS 644 | 82 U.S.L.W. 4043 | 571 U.S. 117 | 24 Fla. L. Weekly Fed. S 503

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Takeaway

In short, Daimler sharply confined corporate general jurisdiction: absent exceptional circumstances, a corporation is subject to suit on any claim only where it is incorporated or has its principal place of business, not wherever it conducts substantial business.

Background

Twenty-two Argentine residents sued Daimler, a German corporation headquartered in Stuttgart, in federal court in California. They alleged that Daimler’s Argentine subsidiary, Mercedes-Benz Argentina, aided Argentine security forces during the 1976–1983 “Dirty War” in kidnapping, torturing, and killing workers and their relatives. The asserted claims arose under the Alien Tort Statute, the Torture Victim Protection Act, and California and Argentine law. None of the alleged abuses, victims, or underlying conduct had a connection to California.

The plaintiffs did not claim specific jurisdiction. Instead, they sought general jurisdiction over Daimler based principally on the California activities of Mercedes-Benz USA (MBUSA), Daimler’s indirect U.S. subsidiary. MBUSA, a Delaware LLC headquartered in New Jersey, imported and distributed Mercedes-Benz vehicles nationwide and maintained facilities and substantial sales in California.

The District Court dismissed for lack of personal jurisdiction. It held that Daimler’s own California contacts were insufficient for general jurisdiction and declined to attribute MBUSA’s contacts to Daimler under an agency theory. The Ninth Circuit initially affirmed, but, after rehearing, held that MBUSA was Daimler’s agent and that California could exercise general jurisdiction over Daimler. The Supreme Court reversed.

Issues

Issue #1

Whether California could exercise general, all-purpose personal jurisdiction over Daimler for claims arising entirely from conduct in Argentina.

Holding

No. Daimler was not “essentially at home” in California, so due process barred California from exercising general jurisdiction over it on these unrelated claims.

Reasoning

The Court distinguished specific jurisdiction from general jurisdiction. Specific jurisdiction concerns claims that arise out of or relate to the defendant’s forum contacts. General jurisdiction is broader: it permits a court to hear any claim against a defendant, including claims unrelated to the forum. Because the alleged human-rights abuses occurred in Argentina and had no California connection, the plaintiffs could rely only on general jurisdiction.

Under Goodyear, a corporation is subject to general jurisdiction only where its affiliations are so continuous and systematic as to render it essentially at home. For a corporation, the paradigmatic all-purpose forums are its place of incorporation and principal place of business. Daimler was incorporated in Germany and headquartered in Germany, not California.

The Court rejected the plaintiffs’ proposed standard that a corporation is generally subject to suit wherever it conducts a substantial, continuous, and systematic course of business. That formulation would turn general jurisdiction into an expansive doing-business rule and expose multinational corporations to suit on any claim in every State where they have sizeable operations.

Even assuming that MBUSA was at home in California and that all of MBUSA’s California contacts could be attributed to Daimler, those contacts did not make Daimler at home there. California sales accounted for only 2.4 percent of Daimler’s worldwide sales, and accepting California as an all-purpose forum on that basis would make Daimler subject to general jurisdiction in many other States with significant MBUSA sales.

Perkins illustrated the exceptional circumstances in which a corporation may be at home outside its formal place of incorporation or principal place of business. During wartime, the Philippine corporation in Perkins had effectively operated from Ohio, where its president maintained the office, files, and central direction of the company’s activities. Daimler’s California presence did not approach that exceptional level.

Issue #2

Whether the Ninth Circuit could attribute MBUSA’s California contacts to Daimler under its agency theory of general jurisdiction.

Holding

No. The Ninth Circuit’s agency test was too broad and could not support general jurisdiction over Daimler.

Reasoning

The Ninth Circuit treated MBUSA as Daimler’s agent because MBUSA performed services sufficiently important that Daimler would perform similar services itself if MBUSA did not exist. The Supreme Court held that this inquiry was circular and overinclusive: anything a corporation delegates to a subsidiary, independent contractor, or distributor is presumably important enough that the corporation would arrange for it by some other means.

That test would effectively subject a foreign corporation to general jurisdiction whenever it used an in-state subsidiary or affiliate. Such a result would exceed the already expansive conception of general jurisdiction rejected in Goodyear.

The Court did not decide whether a properly defined agency theory can ever justify imputing a subsidiary’s contacts to a parent for purposes of general jurisdiction. It held instead that, even assuming attribution were permissible here, Daimler still was not essentially at home in California.

Issue #3

Whether the international setting reinforced the conclusion that California’s exercise of general jurisdiction would violate due process.

Holding

Yes. The foreign parties, foreign conduct, and international-comity concerns confirmed that California could not serve as an all-purpose forum for this dispute.

Reasoning

The plaintiffs were predominantly Argentine, Daimler was German, and the alleged wrongdoing occurred in Argentina. The Court noted that recent decisions also undermined the federal human-rights claims: the Alien Tort Statute is subject to a presumption against extraterritorial application, and the Torture Victim Protection Act permits liability only against natural persons.

The Court emphasized that other nations generally confine broad corporate jurisdiction to places comparable to a corporation’s domicile, such as its statutory seat, central administration, or principal place of business. Unpredictably broad U.S. assertions of general jurisdiction can create international friction, impede reciprocal judgment-enforcement agreements, and discourage foreign investment.

These international-comity concerns reinforced the constitutional conclusion that allowing California to adjudicate this Argentina-rooted suit against Daimler would not comport with fair play and substantial justice.

Concurrences

Justice Sotomayor

Reasoning

Justice Sotomayor agreed that the Ninth Circuit should be reversed, but she would have resolved the case on a narrower ground. In her view, California’s exercise of jurisdiction was unreasonable because Argentine plaintiffs sued a German defendant over conduct in Argentina, while Germany had a much stronger interest in the controversy and the plaintiffs had not shown that California was a more convenient forum.

She would apply the reasonableness factors identified in Asahi, including the burden on the defendant, the forum State’s interest, the plaintiffs’ interest in relief, and the interests of other sovereigns. Although the Court had applied those factors in specific-jurisdiction cases, she saw no need to decide whether the inquiry applies categorically to general jurisdiction because the plaintiffs had conceded its relevance throughout this litigation.

Justice Sotomayor objected that the majority decided an inadequately briefed question: whether Daimler would be at home in California even if MBUSA’s contacts were attributed to it. In her view, that issue was raised only in a footnote in Daimler’s Supreme Court brief and had not been developed below. The Court therefore lacked a complete factual record concerning MBUSA’s role and activities in California.

On the merits, she argued that precedent had focused on the extent of a defendant’s contacts with the forum itself, not on comparing those contacts with the defendant’s worldwide operations. A company should not become less amenable to suit in California merely because it also does extensive business elsewhere. If MBUSA’s California contacts were attributable to Daimler and sufficient to make MBUSA at home there, she believed those same contacts could establish general jurisdiction over Daimler.

She warned that the majority’s comparative approach favored large multinational corporations over smaller firms, curtailed States’ authority over businesses that substantially operate within their borders, and could leave injured plaintiffs without a U.S. forum. In her view, concerns about inconvenience or international friction should be handled through reasonableness analysis, forum non conveniens, venue transfer, or legislation rather than by constitutionally narrowing general jurisdiction.