Note: Due to the process of settling in to my new law firm and teaching a class at the University of Georgia Law School, I have not been able to keep up with this blog. I promise there will be a better effort in 2014! The following post is about a new U.S. Supreme Court case that limits the ability of U.S. courts to hear cases against machinery companies and manufacturers that involve allegations having no connection to the forum (the state in which the lawsuit is filed).
On January 14, 2014, the U.S. Supreme Court decided Daimler AG v. Bauman (Case No. 11-965). In Daimler, the Court held that Daimler AG could not be sued in federal court in California based on allegations that “Mercedes-Benz Argentina (MB Argentina), an Argentinian subsidiary of Daimler, collaborated with state security forces during Argentina’s 1976-1983 ‘Dirty War’ to kidnap, detain, torture, and kill certain MB Argentina workers, among them, plaintiffs or persons closely related to plaintiffs.” The plaintiffs sought to assert various federal and California law claims. The alleged wrongful acts -- which are simply charges in a lawsuit and not proven -- had no California connection and the plaintiffs were not California residents.
Nevertheless, the plaintiffs sought to maintain jurisdiction in California based on contacts that Mercedes-Benz USA, LLC (“MBUSA”) maintained in California. MBUSA is an indirect subsidiary of Daimler that purchases automobiles from Daimler in Germany, imports them, and then distributes them through independent dealerships throughout the U.S., including California. MBUSA’s sales in California were significant. MBUSA also maintained a number of facilities in California. Based on these allegations, a divided Ninth Circuit Court of Appeals previously ruled that the plaintiffs could maintain jurisdiction based on the theory that MBUSA was Daimler’s “agent.”
The Supreme Court disagreed. The Court explained that the due process clause of the U.S. Constitution permits courts to exercise jurisdiction only where maintenance of the suit does not offend traditional notions of fair play and substantial justice. Under the Court’s modern jurisprudence, this test further divides into cases involving “specific jurisdiction” or “general jurisdiction.” “Specific jurisdiction” involves cases where the defendant has continuous and systematic contacts with the forum, and the defendant’s activities gave rise to the liabilities involved in the suit. “General jurisdiction” involves cases where the defendant has regular and systematic connections with the forum that are so substantial that the defendant can be considered “at home” in the jurisdiction, and thus can be sued in the forum for all purposes, regardless of whether the suit involves activities of the defendant that gave rise to the litigation.
Daimler tested the limits of general jurisdiction. The Court first discussed whether MBUSA’s contacts could be imputed to Daimler. The Court expressed skepticism regarding the “agency” theory and rejected it as applied. The Court then held that, even if the MBUSA contacts were imputed to Daimler, the test for general jurisdiction would not be satisfied. Noting that general jurisdiction is normally predicated on a corporation’s state of incorporation or principle place of business, the Court explained that “the inquiry … is not whether a foreign corporation’s in-forum contacts can be said to be in some sense continuous and systematic, it is whether that corporation’s affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State.” (internal quotations omitted). The Court ruled that the fact that MBUSA had substantial sales in California did not meet this test as applied to Daimler.
The Court also noted that considerations of international comity supported its conclusion. “Other nations do not share the uninhibited approach to personal jurisdiction advanced by the Court of Appeals in this case. … Considerations of international rapport thus reinforce our determination that subjecting Daimler to the general jurisdiction of courts in California would not accord with the ‘fair play and substantial justice’ due process demands.”
The impact of Daimler remains to be seen. Because the Court’s decision is based on the due process clause of the U.S. Constitution, it is binding precedent in in all U.S. courts, federal or state. Most cases, however, are based on the assertion of specific jurisdiction, in which the defendant’s activities have some relationship to the liabilities upon which the suit is based, such as selling a product to a resident of the forum state that causes an injury in the state. As the Court noted, jurisdiction in cases involving specific jurisdiction can be predicted on rather limited connections with the forum state. The impact of Daimler is thus most likely to be in cases in which the alleged liabilities have no relationship to the forum state, particularly when those claims are brought against international companies.
On January 14, 2014, the U.S. Supreme Court decided Daimler AG v. Bauman (Case No. 11-965). In Daimler, the Court held that Daimler AG could not be sued in federal court in California based on allegations that “Mercedes-Benz Argentina (MB Argentina), an Argentinian subsidiary of Daimler, collaborated with state security forces during Argentina’s 1976-1983 ‘Dirty War’ to kidnap, detain, torture, and kill certain MB Argentina workers, among them, plaintiffs or persons closely related to plaintiffs.” The plaintiffs sought to assert various federal and California law claims. The alleged wrongful acts -- which are simply charges in a lawsuit and not proven -- had no California connection and the plaintiffs were not California residents.
Nevertheless, the plaintiffs sought to maintain jurisdiction in California based on contacts that Mercedes-Benz USA, LLC (“MBUSA”) maintained in California. MBUSA is an indirect subsidiary of Daimler that purchases automobiles from Daimler in Germany, imports them, and then distributes them through independent dealerships throughout the U.S., including California. MBUSA’s sales in California were significant. MBUSA also maintained a number of facilities in California. Based on these allegations, a divided Ninth Circuit Court of Appeals previously ruled that the plaintiffs could maintain jurisdiction based on the theory that MBUSA was Daimler’s “agent.”
The Supreme Court disagreed. The Court explained that the due process clause of the U.S. Constitution permits courts to exercise jurisdiction only where maintenance of the suit does not offend traditional notions of fair play and substantial justice. Under the Court’s modern jurisprudence, this test further divides into cases involving “specific jurisdiction” or “general jurisdiction.” “Specific jurisdiction” involves cases where the defendant has continuous and systematic contacts with the forum, and the defendant’s activities gave rise to the liabilities involved in the suit. “General jurisdiction” involves cases where the defendant has regular and systematic connections with the forum that are so substantial that the defendant can be considered “at home” in the jurisdiction, and thus can be sued in the forum for all purposes, regardless of whether the suit involves activities of the defendant that gave rise to the litigation.
Daimler tested the limits of general jurisdiction. The Court first discussed whether MBUSA’s contacts could be imputed to Daimler. The Court expressed skepticism regarding the “agency” theory and rejected it as applied. The Court then held that, even if the MBUSA contacts were imputed to Daimler, the test for general jurisdiction would not be satisfied. Noting that general jurisdiction is normally predicated on a corporation’s state of incorporation or principle place of business, the Court explained that “the inquiry … is not whether a foreign corporation’s in-forum contacts can be said to be in some sense continuous and systematic, it is whether that corporation’s affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State.” (internal quotations omitted). The Court ruled that the fact that MBUSA had substantial sales in California did not meet this test as applied to Daimler.
The Court also noted that considerations of international comity supported its conclusion. “Other nations do not share the uninhibited approach to personal jurisdiction advanced by the Court of Appeals in this case. … Considerations of international rapport thus reinforce our determination that subjecting Daimler to the general jurisdiction of courts in California would not accord with the ‘fair play and substantial justice’ due process demands.”
The impact of Daimler remains to be seen. Because the Court’s decision is based on the due process clause of the U.S. Constitution, it is binding precedent in in all U.S. courts, federal or state. Most cases, however, are based on the assertion of specific jurisdiction, in which the defendant’s activities have some relationship to the liabilities upon which the suit is based, such as selling a product to a resident of the forum state that causes an injury in the state. As the Court noted, jurisdiction in cases involving specific jurisdiction can be predicted on rather limited connections with the forum state. The impact of Daimler is thus most likely to be in cases in which the alleged liabilities have no relationship to the forum state, particularly when those claims are brought against international companies.
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