Case Study: Bauman v. DaimlerChrysler Corp.


Recently, the Ninth Circuit issued its decision in Bauman v. DaimlerChrysler Corp., ---F.3d ---, 2011 WL 1879210, a potentially transformative case that expands the use of “agency theory” to impose general jurisdiction over foreign corporations that do business in the U.S. solely through their U.S. subsidiaries.

In a decision by Justice Stephen Reinhardt, the Ninth Circuit held that personal jurisdiction existed over DaimlerChrysler Aktiengellschaft (DCAG), a German company, because DCAG maintained the right to control its wholly owned U.S. subsidiary, Mercedes-Benz USA LLC (MBUSA), such that DCAG could be haled into court in California due to MBUSA’s contacts with that state.

Notably, the Bauman decision subjects DCAG to California’s jurisdiction despite the fact that the events giving rise to the lawsuit did not take place in the U.S. or involve the contacts relied upon by the court in exercising general jurisdiction over DCAG in the first place. As such, this opinion — if it stands — has the potential to affect any foreign company that does business in the U.S. through subsidiaries regardless of whether those subsidiaries have anything to do with the parent’s alleged actions giving rise to the lawsuit.

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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.

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