Daimler AG v. Bauman and its Progeny: U.S. Courts Significantly Limit General Personal Jurisdiction

by Akerman LLP
Contact

In Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Supreme Court issued a unanimous decision that significantly limited where a corporate defendant is subject to general jurisdiction in the United States. This ruling provides greater predictability with respect to whether a corporate defendant will be amenable to suit in a particular forum where the claims are unrelated to the corporation's activities in that state.

Daimler will inevitably have a far-reaching effect on litigation across the United States because personal jurisdiction is a fundamental element of every lawsuit. In order for a U.S. court to exercise authority over a defendant, the defendant must be subject to either specific jurisdiction or general jurisdiction. "Specific jurisdiction" exists when a claim arises from a defendant's activities in the forum state or its activities directed toward the forum state. "General jurisdiction," on the other hand, permits a court to exercise personal jurisdiction over the defendant for any matter, even if the claim is unrelated to a defendant's contacts or activities within that state.

Daimler signifies the Supreme Court's continuing trend of limiting general jurisdiction over a non-resident defendant and adopts a substantially simplified general jurisdiction analysis. Under Daimler, a court should focus solely on whether a defendant corporation is essentially "at home" in the forum state. If it is not, general jurisdiction does not exist and the court can only adjudicate the matter if plaintiff demonstrates that the corporation's in-state conduct gives rise to the plaintiff's cause of action (thus establishing specific jurisdiction).

The Daimler Decision

In Daimler, Argentinean residents brought claims against DaimlerChrysler AG ("Daimler"), a German company, for events and injuries that occurred entirely outside of the United States. The complaint alleged that during Argentina's 1976-1983 "Dirty War," Daimler's Argentinean subsidiary, Mercedes-Benz Argentina ("MB Argentina") collaborated with Argentina's state security forces to harm plaintiffs or their family members. Plaintiffs sued Daimler in the United States District Court for the Northern District of California and sought damages for human-rights violations under the laws of the United States, California, and Argentina.

Daimler moved to dismiss the complaint for lack of personal jurisdiction. In response, Plaintiffs argued that the California contacts of Daimler's wholly-owned subsidiary, Mercedes-Benz USA, LLC ("MBUSA"), provided a basis for asserting jurisdiction over Daimler. Although Daimler does not directly manufacture or sell products in the United States, MBUSA – which is incorporated in Delaware and has a principal place of business in New Jersey – distributes Daimler-manufactured vehicles to independent dealerships throughout the United States, including California. The district court dismissed the case, finding that MBUSA's California contacts could not be imputed to Daimler under an agency theory for the purpose of establishing general jurisdiction. The Ninth Circuit Court of Appeals initially affirmed the dismissal, but on rehearing in 2011, reinstated the action. The Ninth Circuit held that plaintiffs had sufficiently pleaded an agency theory under which Daimler was subject to general jurisdiction in California based on MBUSA's California contacts. In particular, the Ninth Circuit found that: (i) MBUSA had extensive forum contacts (e.g., MBUSA maintained offices in California and its sales in California accounted for 2.4% of Daimler's worldwide sales); (ii) MBUSA's distribution services were sufficiently important to Daimler (i.e., its parent corporation); and (iii) Daimler had the right to exert actual control over MBUSA, even though it did not actually do so.

On January 14, 2014, in an opinion authored by Justice Ginsburg (with a concurrence by Justice Sotomayor), the Court overturned the Ninth Circuit's ruling and held that general jurisdiction does not exist over a foreign corporate parent based solely on its subsidiary's in-state contacts. Elaborating on its prior decision in Goodyear Dunlop Tires Operations, S. A. v. Brown, 131 S. Ct. 2846 (2011), the Court held that "only a limited set of affiliations will render a defendant amenable" to general jurisdiction, and with respect to a corporation, these affiliations are typically limited to the corporation's place of incorporation and principal place of business. Daimler, 134 S. Ct. at 762. While the Court acknowledged that "in an exceptional case," general jurisdiction may exist elsewhere, it noted that the plaintiff would need to prove that the company's operations are so substantial and of such a nature as to render the corporation "at home" in that state. Id. at 761 n. 19. Driving home the point that a general jurisdiction analysis should focus on a corporation's true locus of corporate activity, the Court noted that the inquiry "calls for an appraisal of a corporation's activities in their entirety, nationwide and worldwide. A corporation that operates in many places can scarcely be deemed at home in all of them." Id. at 762, n. 20. These bases for asserting general jurisdiction afford plaintiffs at least one clear forum in which a corporate defendant may be sued on any and all claims, and provide both plaintiffs and defendants with greater predictability as to whether a claim can be filed in a particular forum.

In addition to limiting where a foreign entity can be sued, Daimler will likely limit the amount of jurisdictional discovery granted by U.S. courts. Responding to Justice Sotomayor’s concern that the Court's decision would lead to an expansion of the scope of jurisdictional discovery, Justice Ginsberg stated that it should actually result in less jurisdictional discovery because "it is hard to see why much in the way of discovery would be needed to determine where a corporation is at home." Daimler, 134 S. Ct. at 762, n. 20. Ultimately, Daimler's holding seeks to "promote the efficient disposition of an issue that should be resolved expeditiously at the outset of litigation." Id.

General Jurisdiction Post-Daimler

Although the effects of Daimler are still in their infancy, courts throughout the country are quickly adopting the new, limited jurisdictional standard. Indeed, since Daimler, the Court of Appeals for the Second Circuit has already issued two decisions dismissing claims over out of state defendants based on lack of general jurisdiction. On February 7, 2014, the Second Circuit issued a decision in In re Roman Catholic Diocese of Albany, New York, Inc., 745 F.3d 30 (2014) (hereinafter referred to as "RCD"), granting the Diocese's petition for a writ of mandamus and instructing the district court to grant the Diocese's motion to dismiss. In RCD, the plaintiff argued that general jurisdiction existed over the Diocese for actions that were purportedly committed outside of Vermont. The Second Circuit vacated the district court's order and found that the Diocese was not "at home" in Vermont based on the Diocese's "scant" contacts with the forum. The Court further concluded that "there is no way to reconcile the district court's decision with Daimler AG," which required dismissal based on lack of personal jurisdiction. Id. at 40.

Similarly, on April 25, 2014, the Second Circuit issued a decision in Sonera Holding v. Çukurova Holdings,  2014 WL 1645255 (2d Cir. 2014), holding that general jurisdiction did not exist over Çukurova – a corporate parent of a Turkish conglomerate – because Çukurova did not have sufficient contacts with the State of New York. The Court overturned a preliminary injunction that had prevented Çukurova from selling assets, transferring funds or raising finances globally. It also reversed the district court's ruling to enforce a $932 million foreign arbitration that Sonera had obtained against Çukurova. In reaching its decision, the three-judge panel cited Daimler and held that in order to establish jurisdiction over a foreign entity, the entity must have substantial enough contact to make it "at home" in the forum state. Id. at *3. The Court acknowledged that although Çukurova holds investments in other companies that have or have had some form of contact with New York, it has no operations of its own and owns no property in New York or in the wider U.S. As such, the panel found that "Çukurova's contacts with New York [are] insufficient to subject it to general jurisdiction." Id. at *2.

The Seventh Circuit has also embraced Daimler as demonstrated in its decision in Snodgrass v. Berklee College of Music 2014 WL 960898 (7th Cir. Mar. 13, 2014). In Snodgrass, an Illinois resident sued her former employers in federal court in Illinois, even though all of the defendants – three well-known educational institutions – had their principal places of business and were incorporated in Massachusetts. Plaintiff claimed that they were subject to general jurisdiction based on the institutions "sizeable endowment[s] and extensive 'cyber contacts.'" Id. at *1. Relying on Daimler, the court rejected plaintiff's expansive general jurisdiction argument and dismissed the complaint.

Together, these cases provide a glimpse into the expansive impact that Daimler will likely have on cases in which a plaintiff seeks to assert general jurisdiction over a foreign corporation with minimal in-state contacts. Moreover, they mark a significant development in general jurisdiction jurisprudence and establish a new era in which multinational corporations can expect greater predictability with respect to where they can anticipate defending claims brought in the United States.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Akerman LLP | Attorney Advertising

Written by:

Akerman LLP
Contact
more
less

Akerman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!