Supreme Court limits the reach of ‘general jurisdiction’ in federal courts

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by Michael Heygood

Several residents of Argentina filed suit in a California Federal District Court, naming as a defendant the predecessor to Daimler AG, a German corporation. The lawsuit alleged 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. Based on those allegations, plaintiffs asserted claims under the Alien Tort Statute and the Torture Victim Protection Act of 1991, as well as under California and Argentina law.

Personal jurisdiction over Daimler was predicated on the California contacts of Mercedes–Benz USA, LLC, a Daimler subsidiary incorporated in Delaware with its principal place of business in New Jersey. The subsidiary distributes Daimler-manufactured vehicles to independent dealerships throughout the United States, including California.

Daimler moved to dismiss the action for want of personal jurisdiction. The plaintiffs argued that jurisdiction over Daimler could be founded on the California contacts of the U.S.-based subsidiary. The District Court granted Daimler’s motion to dismiss. Reversing the District Court’s judgment, the Ninth Circuit held that the U.S. subsidiary, which it assumed to fall within the California courts’ all-purpose jurisdiction, was Daimler’s “agent” for jurisdictional purposes, so that Daimler, too, should generally be answerable to suit in that State. The Supreme Court has now reversed. The Supreme Court held that, even assuming that the U.S.-based subsidiary is itself at “home” in California and further assuming that the subsidiary’s contacts are imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California.

On the one hand, the Supreme Court’s holding hardly seems surprising: the German entity Daimler cannot be sued in California for injuries allegedly caused by conduct of its Argentinian subsidiary when that conduct took place entirely outside of the United States. However, the opinion appears to signal a dramatic shift in the way federal courts are to construe “general jurisdiction.”

Federal courts recognize two different categories of jurisdiction over a defendant. One category, called “specific jurisdiction,” encompasses cases in which the suit arises out of or relates to the defendant’s contacts with the forum. As the name suggests, jurisdiction under the category is case-specific: it depends on a connection between the forum and the defendant’s conduct at issue in the lawsuit.

The other category is known as “general jurisdiction.” Under this category, jurisdiction depends on the defendant’s contact with the form “in general” and does not depend on the conduct at issue in the particular case. A federal court may exercise jurisdiction over a corporation when its “continuous corporate operations within 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.” For example, assuming Daimler were subject to “general jurisdiction” in California, “if a Daimler-manufactured vehicle overturned in Poland, injuring a Polish driver and passenger, the injured parties could maintain a design defect suit in California.” Daimler AG v. Bauman.

General jurisdiction has been considered to be appropriate where a defendant maintains so-called “continuous and systematic” contacts with the forum state. However, the Supreme Court’s opinion in the Bauman case—citing to its decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ––––, ––––, 131 S.Ct. 2846, 2853, 180 L.Ed.2d 796 (2011)—emphasized that “continuous and systematic” contacts with the forum are not enough: “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.’” Daimler AG v. Bauman.

What does it mean to be “at home” in the forum state? The Bauman opinion sets forth a strict view:

[O]nly a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there. “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” … With respect to a corporation, the place of incorporation and principal place of business are “paradig[m] … bases for general jurisdiction.” ‘’’ Those affiliations have the virtue of being unique—that is, each ordinarily indicates only one place—as well as easily ascertainable. … These bases afford plaintiffs recourse to at least one clear and certain forum in which a corporate defendant may be sued on any and all claims.

Daimler AG v. Bauman. In a footnote, the court added:

We do not foreclose the possibility that in an exceptional case, see, e.g., Perkins, … 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.

Id. (emphasis added). The court’s lone example of an “exceptional case” is indeed exceptional. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952). The defendant in Perkins was a company incorporated under the laws of the Philippines, where it operated gold and silver mines. Benguet ceased its mining operations during the Japanese occupation of the Philippines in World War II; its president moved to Ohio, where he kept an office, maintained the company’s files, and oversaw the company’s activities. The plaintiff, an Ohio resident, sued Benguet on a claim that neither arose in Ohio nor related to the corporations activities in that State. The Supreme Court held that the Ohio courts could exercise general jurisdiction over Benguet without offending due process because “Ohio was the corporation’s principal, if temporary, place of business.”

In short, the Bauman opinion suggested that, absent “exceptional” circumstances, there is general jurisdiction only where the defendant corporation is incorporated or has its principal place of business. If the corporation is not “at home” in the forum state, there is no personal jurisdiction over it unless its in-state conduct gave rise to the cause of action (i.e. “specific jurisdiction”). As a practical matter, to use a phrase quoted by Justice Ginsburg in her opinion for the majority, “specific jurisdiction will come into sharper relief and form a considerably more significant part of the scene.”