United States: Give Me Your Tired, Your Poor, Your Huddled Masses … But Not Your Plaintiffs: Supreme Court Decision Limits General Personal Jurisdiction Over Foreign Defendants

It is no secret that U.S. courts are among the most favorable to plaintiffs, especially with regard to damages awards. For this reason, there has been a growing trend of foreign plaintiffs bringing lawsuits in the U.S. even where neither the plaintiff(s) nor the incident causing injury has any real connection to the U.S. This is especially true in the field of aviation, where more and more frequently foreign air disasters are resulting in U.S. litigation despite the lack of any apparent connection to the U.S.

The doctrine of forum non conveniens (FNC), through which U.S. courts dismiss actions on the basis of inconvenience where there is a more convenient forum elsewhere, has proven effective in shifting many of these cases to a proper, foreign jurisdiction. In some cases, and especially some jurisdictions (e.g., Cook County, Illinois), however, FNC motions have met with little success. Those of us involved with these cases are fully familiar with the importance of these decisions, as the result of an FNC motion can change the value of a single plaintiff's claim by hundreds of thousands, if not millions, of dollars.

Thus, the U.S. Supreme Court's reversal of a troubling decision from the Ninth Circuit, in which the Circuit Court found that there was personal jurisdiction over a foreign defendant for claims arising out of a foreign incident, is a positive development for multinational corporations. In an opinion issued on January 14, 2014, the Supreme Court in Daimler AG v. Bauman1 found that a California federal district court lacked personal jurisdiction over the foreign defendant for claims (1) brought by foreign plaintiffs and (2) arising from the alleged acts entirely outside of the U.S. of the defendant's foreign subsidiary: "Exercises of personal jurisdiction so exorbitant, we hold, are barred by due process constraints on the assertion of adjudicatory authority."

There are two types of personal jurisdiction: specific jurisdiction and general jurisdiction. Specific jurisdiction recognizes that even a single act or occurrence in the forum may be enough to subject a corporation to jurisdiction. General jurisdiction, on the other hand, provides a basis for jurisdiction over a corporation for all suits, regardless of their connection to the forum, where "a foreign corporation's 'continuous corporate operations with a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.'" The Court's opinion in Daimler places a limit on the reach of general jurisdiction.

In Daimler, 22 Argentine residents commenced litigation against DaimlerChrysler Aktiengesellschaft, a German company (Daimler). The claims related to human rights violations allegedly committed by Daimler's Argentine-subsidiary Mercedes- Benz Argentina (MB Argentina) during Argentina's "Dirty War" (a campaign waged from 1976 to 1983 by Argentina's military dictatorship against suspected left-wing political opponents in which thousands of people were killed). No part of MB Argentina's conduct took place in California or anywhere else in the U.S., and MB Argentina was not named as a defendant. Instead, the plaintiffs sought to hold Daimler vicariously liable for its subsidiary's conduct.

The plaintiffs argued that the court had personal jurisdiction over Daimler based on the "California contacts" of Mercedes Benz USA (MBUSA), an indirect subsidiary of Daimler that acts as Daimler's exclusive importer and distributor of automobiles in the U.S. MBUSA has multiple facilities in California and is the largest supplier of luxury automobiles in California. MBUSA's California sales totaled $4.6 billion in 2004, a substantial amount of money by almost any standard, but just 2.4 percent of Daimler's worldwide sales that year.

The district court dismissed the lawsuit for lack of personal jurisdiction but the Ninth Circuit, which initially affirmed the district court's ruling, reversed after rehearing on the grounds that there was an agency relationship between Daimler and MBUSA sufficient to attribute MBUSA's California contacts to Daimler, and "considerations of 'reasonableness' did not bar the exercise of jurisdiction."

On appeal, the Supreme Court, finding that Daimler was not subject to general jurisdiction in California, that is, its "affiliations with the State [were not] so continuous and systemic as to render it essentially at home in the forum State," reversed. The Court reasoned that, if Daimler's California activities were sufficient to allow the district court to hear this "Argentina-rooted case in California," Daimler would be subject to suit in any state where MBUSA had sizable sales. The Court found such an outcome impermissible under the Due Process Clause of the Fourteenth Amendment and, accordingly, held that it was error to subject Daimler to suit in California "on claims by foreign plaintiffs having nothing to do with anything that occurred or had its principal impact in California."

Perhaps the most interesting (and from the perspective of a foreign corporation, exciting) aspect of the Court's decision is its imposition of what Justice Sotomayor in her concurring opinion deemed a "proportionality test," whereby the Court chose to look at Daimler's U.S. contacts in the context of Daimler's entire operations, as opposed to simply evaluating those U.S. contacts on their own merit. In other words, where the analysis seemingly used to focus only on a defendant's U.S. contacts, with the assumption being that general jurisdiction was proper where the contacts were substantial and continuous, the analysis applied by the Court in Daimler appears to require that a defendant's U.S. contacts be viewed in context of its global operations to see if the U.S. operations are sufficient to support a finding that the foreign company was "at home" in the U.S. This is important because it appears to protect foreign companies from personal jurisdiction in the U.S. even where they have substantial contacts with the U.S. (e.g., a foreign airline that operates flights to/from the U.S. and has offices in the U.S.) where the U.S. operations do not constitute a sufficient percentage of the company's entire operations. Of course, it is not at this time clear exactly what percentage would be deemed sufficient.

In reaching its decision, the Supreme Court was mindful of the many business and political implications of affirming the far-reaching general jurisdiction proposed by the Ninth Circuit. It noted that, without limits on the exercise of jurisdiction by U.S. courts, foreign companies would be unable to structure their conduct in a manner to allow them to know where they will or will not be amenable to suit. The Court also noted that its limitation on personal jurisdiction was more in line with the jurisdictional limitations adhered to in, for example, the European Union, and that a broader application of personal jurisdiction could discourage foreign investment in the U.S.

The practical impact of this ruling is that it will be more difficult for plaintiffs to maintain suit in the U.S. against foreign multinational corporations for conduct that occurs outside and is unrelated to the U.S. At a minimum, the decision provides foreign aviation defendants with another arrow in their quiver of defenses to litigation in the U.S. arising out of foreign incidents involving foreign plaintiffs. The greater hope, however, is that it will provide a powerful supplement to the doctrine of forum non conveniens, thwarting efforts by courts such as those in Cook County to retain jurisdiction over cases, especially those arising out of air disasters, with no connection to the U.S. In any event, the Court's decision provides a reason for us to smile, at least temporarily.

Footnote

1. Daimler AG v. Bauman, 571 U.S. _______ (2014) (slip op).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions