United States: Second Circuit Finds No "Exceptional Case" For General Jurisdiction Under Daimler And Vacates $655M Judgment

Last Updated: September 26 2016
Article by Stosh M. Silivos

Stosh Silivos is a litigation attorney in Holland & Knights New York office

The Second Circuit Court of Appeals vacated a $655 million jury award related to terror attacks in Israel, finding the lower court lacked personal jurisdiction over the defendants. In Waldman v. Palestine Liberation Organization,1 a unanimous panel continued the trend of limiting the exercise of general jurisdiction and held that the suit was not an "exceptional case" as discussed in Daimler AG v. Bauman2 because the defendants were not "at home" in the United States. The court also determined that specific jurisdiction was lacking because the defendant's suit-related conduct did not create a substantial connection with the United States. Thus, the court remanded the action to the district court with instructions to dismiss for lack of personal jurisdiction.

District Court Proceedings

In 2004, the families of eleven American victims of various terror attacks in Israel sued the Palestinian Authority (PA) and the Palestine Liberation Organization (PLO) in the U.S. District Court for Southern District of New York under the civil remedies provision of the Anti-Terrorism Act (18 U.S.C. § 2333(a)). The district court rejected defendants' jurisdictional objections and determined that defendants were subject to the court's general jurisdiction. 

The district court's conclusion was initially based on its determination that the defendants had a "continuous and systematic presence within the United States." 3  However, after the Supreme Court's Daimler decision significantly narrowed the general personal jurisdiction test by holding that the exercise of general jurisdiction is proper only where a defendant is "at home" in the forum (i.e., its place of incorporation and principal place of business), the district court rejected the defendants' renewed jurisdictional objections4 on the basis that the action presented "an exceptional case" of the kind discussed in Daimler.5  Specifically, the district court found that (1) the defendants, neither of which were corporations, were "not subject to the traditional analysis of determining a defendant's place of incorporation or place of business," and (2) the record was "insufficient to conclude that either defendant was 'at home' in a particular jurisdiction other than the United States." Therefore, the defendants' "continuous and systematic business and commercial contacts" within the United States were "sufficient to support the exercise of jurisdiction."  The Second Circuit subsequently denied defendants' petition for mandamus on their jurisdictional objections. 

At trial, the jury found the defendants liable for six terror attacks and awarded plaintiffs a $218.5 million judgment, which was trebled to $655.5 million pursuant to the Anti-Terrorism Act.

Second Circuit Decision

On appeal, the Second Circuit reviewed the jurisdictional issue de novo and determined that the defendants were not subject to personal jurisdiction with respect to the plaintiffs' claims.

The court resolved a number of threshold issues, including reaffirming that the personal jurisdiction analysis in civil cases is similar under the Fifth Amendment (which applies to federal question cases, like Waldman) and the Fourteenth Amendment (which applies to state court cases and to federal diversity cases).6

The panel then reviewed the district court's conclusion that it had general jurisdiction over the defendants, declaring that the conclusion "relie[d] on a misreading of the Supreme Court's decision in Daimler."  The court noted that "while Daimler involved corporations . . . Daimler's reasoning was based on an analogy to general jurisdiction over individuals, and there is no reason to invent a different test for general personal jurisdiction depending on whether the defendant is an individual, a corporation, or another entity."  Thus, the court explained, "[p]ursuant to Daimler, the question becomes, where are the PA and PLO 'fairly regarded as at home'?"  The panel had no trouble answering that question (and rejecting the district court's finding to the contrary): "[t]he overwhelming evidence shows that the defendants are 'at home' in Palestine, where they govern."

The panel acknowledged that Daimler recognized the possibility of "an exceptional case" where "a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State;" however, the facts here did not present such a case.  The court noted that, in "refus[ing] to foreclose the possibility" that such an exceptional case might exist, the Daimler Court had cited to Perkins v. Benguet Consol. Mining Co.,7 —a prior Supreme Court case in which the defendant had been shut out of its actual home country during WWII and set up a temporary home in the forum state.  The court concluded, "[t]he defendants' activities in this case . . . 'plainly do not approach' the required level of contact to qualify as 'exceptional' because the defendants "have not transported their principle 'home' to the United States, even temporarily, as the defendant had in Perkins."   Accordingly, the court held that the exercise of general jurisdiction over the defendants was improper.

The panel then addressed whether the defendants were subject to specific jurisdiction, a theory of personal jurisdiction that the district court had not reached.  The court ultimately determined that specific jurisdiction was likewise absent because "[t]here is no basis to conclude that the defendants participated in these acts in the United States or that their liability for these acts resulted from their actions that did occur in the United States."

The Takeaway

The Second Circuit has confirmed the high bar necessary to invoke a federal court's general jurisdiction.  Following Daimler's limitation on the exercise of general jurisdiction, many plaintiffs have attempted to characterize their action as the type of "exceptional case," alluded to in Daimler.  The district court's decisionwas one of the few, if not only, instances of a reported decision that agreed with that characterization.  The Second Circuit's rejection of that decision—and its suggestion that a case may only be "exceptional" if the defendant has temporarily "transported [its] principle 'home' to the [forum]"—confirms that the "exceptional case" is rare indeed.  

Footnotes

1 No. 15-3135-CV, __ F.2d __, 2016 WL 4537369 (2d Cir. Aug. 31, 2016).

2 134 S. Ct. 746 (2014).

3 Sokolow v. Palestine Liberation Org., No. 04-cv-00397, 2011 WL 1345086, at *3 (S.D.N.Y. Mar. 30, 2011).

4 Sokolow v. Palestine Liberation Org., No. 04-cv-00397, 2014 WL 6811395, at *1 (S.D.N.Y. Dec. 1, 2014).

5 See Daimler, 134 S. Ct. at 762 & n.19 (explaining that a corporation's place of incorporation and principal place of business are the "paradigm" bases of general jurisdiction over the corporation, but noting that the Court would "not foreclose the possibility that in an exceptional case . . . a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State")

6 There is one distinction in that under the Fifth Amendment the court may consider the defendant's contacts throughout the United States, whereas under the Fourteenth Amendment the court may consider only the contacts with the forum state.

7 342 U.S. 437 (1952)

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.

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.