Can a U.S. court exercise jurisdiction over claims by foreign
plaintiffs against a foreign corporation based on events in a
foreign country? In a case decided on January 14, 2014, the United
States Supreme Court said "No."
In Daimler AG v. Bauman, several Argentine residents
brought suit in a California federal court against Stuttgart-based
Daimler AG (Daimler) for allegedly participating in human rights
violations in Argentina during that country's "Dirty
War." The Court of Appeals for the Ninth Circuit sustained
jurisdiction based on the substantial business carried on in
California by Daimler's U.S. subsidiary. The Supreme Court
unanimously reversed and held that such an exercise of jurisdiction
over Daimler violated due process under the U.S. Constitution. The
Court's opinion (written by Justice Ginsburg, with Justice
Sotomayor concurring only in the result) was based on three
First, the Court held that the business carried on in California
by Daimler's U.S. subsidiary did not subject Daimler itself to
jurisdiction. The Ninth Circuit had treated the subsidiary as
Daimler's agent and imputed the subsidiary's contacts with
California to Daimler because the subsidiary conducted business
that Daimler itself would have conducted if the subsidiary did not
exist. The Supreme Court said that analysis "stack[ed] the
deck" in favor of jurisdiction because it would "subject
foreign corporations to general jurisdiction whenever they have an
in-state subsidiary or affiliate." Such a
"sprawling" view of jurisdiction was too much for the due
Second, the Court held that even if the subsidiary's
business in California were attributable to Daimler on an agency
theory, that business was too "slim" for general
jurisdiction relative to Daimler's "activities in their
entirety, nationwide and worldwide." Neither Daimler nor its
subsidiary is incorporated in California and neither has its
principal place of business there. Accordingly, California could
not be considered Daimler's "home" for jurisdictional
purposes: "A corporation that operates in many places can
scarcely be deemed at home in all of them."
Third, the Court considered the "transnational
context" of the dispute and the fact that "[o]ther
nations do not share the uninhibited approach to personal
jurisdiction" applied by the Ninth Circuit.
"Considerations of international rapport thus
reinforce[d]" the Court's determination that subjecting
Daimler to jurisdiction in California violated due process.
The Daimler case represents a significant check on
efforts to expand the jurisdiction of U.S. courts over essentially
foreign disputes. Going forward, such disputes will generally have
to be brought in a corporate defendant's "home"
state, i.e., where it is incorporated or has its principal place of
business. This will shield many foreign corporations from lawsuits
in U.S. courts over disputes that arise from events and activities
outside the U.S.
It must be emphasized, however, that Daimler involves
what is known as "general" or "all-purpose"
jurisdiction over disputes unrelated to the forum state. It places
no limits on the "specific" jurisdiction that U.S. courts
exercise over disputes arising out of a foreign corporation's
activities within the forum state. As the Court noted, its analysis
would not apply to a claim by a California plaintiff injured by a
Daimler vehicle in California; instead, such a claim would be
considered under the broader specific jurisdiction rules applicable
to claims arising from or related to a defendant's business
activities in the state.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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