The US Supreme Court last week issued a major ruling that will significantly limit where corporations may be sued for claims that do not relate to business they may do in a particular place. In Daimler A.G. v. Bauman, the Court ruled unanimously that DaimlerChrysler AG (“Daimler”) in Germany could not be sued in California federal court based on the continuous and substantial business activities of its US subsidiary Mercedes-Benz USA, LLC (“MBUSA”) where the claims at issue were for human rights violations allegedly committed by Daimler’s Argentine subsidiary (“MB Argentina”) in Argentina decades ago. Eight of the nine Justices held that under the Due Process Clause of the Fourteenth Amendment to the US Constitution there was no personal jurisdiction over Daimler based on its relationship with MBUSA or MBUSA’s California connections.
The decision in Daimler will have a broad ripple effect on US litigation because personal jurisdiction is an essential element of every lawsuit. For example, this decision will affect where mass tort and products liability claims may be asserted, when US courts should order discovery of information from a foreign party or non-parties located outside the United States, or when US courts may attempt to enforce injunctions and judgments beyond the United States against foreign parties or non-parties. At its most basic, Daimler suggests that simply because a company is licensed to do business or operates a branch in a state no longer means that the company may be sued in that state on claims that have nothing to do with the company’s actual activities in that state. Daimler also is likely to focus attention on how personal jurisdiction is pled and how difficult courts will make it for plaintiffs to try to plead around corporate separateness to establish personal jurisdiction over non-resident companies with affiliated companies in a forum.
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