The Second Circuit Court of Appeals vacated a $655 million jury award related to terror attacks in Israel, finding the lower court lacked personal jurisdiction over the defendants. In Waldman v. Palestine Liberation Organization,1 a unanimous panel continued the trend of limiting the exercise of general jurisdiction and held that the suit was not an "exceptional case" as discussed in Daimler AG v. Bauman2 because the defendants were not "at home" in the United States. The court also determined that specific jurisdiction was lacking because the defendant's suit-related conduct did not create a substantial connection with the United States. Thus, the court remanded the action to the district court with instructions to dismiss for lack of personal jurisdiction.

District Court Proceedings

In 2004,the families of eleven American victims of various terror attacks in Israel sued the Palestinian Authority (PA) and the Palestine Liberation Organization (PLO) in the U.S. District Court for Southern District of New York under the civil remedies provision of the Anti-Terrorism Act (18 U.S.C. § 2333(a)). The district court rejected defendants' jurisdictional objections and determined that defendants were subject to the court's general jurisdiction.

The district court's conclusion was initially based on its determination that the defendants had a "continuous and systematic presence within the United States." 3 However, after the Supreme Court's Daimler decision significantly narrowed the general personal jurisdiction test by holding that the exercise of general jurisdiction is proper only where a defendant is "at home" in the forum (i.e., its place of incorporation and principal place of business), the district court rejected the defendants' renewed jurisdictional objections4 on the basis that the action presented "an exceptional case" of the kind discussed in Daimler.5 Specifically, the district court found that (1) the defendants, neither of which were corporations, were "not subject to the traditional analysis of determining a defendant's place of incorporation or place of business," and (2) the record was "insufficient to conclude that either defendant was ‘at home' in a particular jurisdiction other than the United States." Therefore, the defendants' "continuous and systematic business and commercial contacts" within the United States were "sufficient to support the exercise of jurisdiction." The Second Circuit subsequently denied defendants' petition for mandamus on their jurisdictional objections.

At trial, the jury found the defendants liable for six terror attacks and awarded plaintiffs a $218.5 million judgment, which was trebled to $655.5 million pursuant to the Anti-Terrorism Act.

Second Circuit Decision

On appeal, the Second Circuit reviewed the jurisdictional issue de novo and determined that the defendants were not subject to personal jurisdiction with respect to the plaintiffs' claims.

The court resolved a number of threshold issues, including reaffirming that the personal jurisdiction analysis in civil cases is similar under the Fifth Amendment (which applies to federal question cases, like Waldman) and the Fourteenth Amendment (which applies to state court cases and to federal diversity cases).6

The panel then reviewed the district court's conclusion that it had general jurisdiction over the defendants, declaring that the conclusion "relie[d] on a misreading of the Supreme Court's decision in Daimler." The court noted that "while Daimler involved corporations . . . Daimler's reasoning was based on an analogy to general jurisdiction over individuals, and there is no reason to invent a different test for general personal jurisdiction depending on whether the defendant is an individual, a corporation, or another entity." Thus, the court explained, "[p]ursuant to Daimler, the question becomes, where are the PA and PLO ‘fairly regarded as at home'?" The panel had no trouble answering that question (and rejecting the district court's finding to the contrary): "[t]he overwhelming evidence shows that the defendants are ‘at home' in Palestine, where they govern."

The panel acknowledged that Daimler recognized the possibility of "an exceptional case" where "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;" however, the facts here did not present such a case. The court noted that, in "refus[ing] to foreclose the possibility" that such an exceptional case might exist, the Daimler Court had cited to Perkins v. Benguet Consol. Mining Co.,7 —a prior Supreme Court case in which the defendant had been shut out of its actual home country during WWII and set up a temporary home in the forum state. The court concluded, "[t]he defendants' activities in this case . . . ‘plainly do not approach' the required level of contact to qualify as ‘exceptional' because the defendants "have not transported their principle ‘home' to the United States, even temporarily, as the defendant had in Perkins." Accordingly, the court held that the exercise of general jurisdiction over the defendants was improper.

The panel then addressed whether the defendants were subject to specific jurisdiction, a theory of personal jurisdiction that the district court had not reached. The court ultimately determined that specific jurisdiction was likewise absent because "[t]here is no basis to conclude that the defendants participated in these acts in the United States or that their liability for these acts resulted from their actions that did occur in the United States."

The Takeaway

The Second Circuit has confirmed the high bar necessary to invoke a federal court's general jurisdiction. Following Daimler's limitation on the exercise of general jurisdiction, many plaintiffs have attempted to characterize their action as the type of "exceptional case," alluded to in Daimler. The district court's decisionwas one of the few, if not only, instances of a reported decision that agreed with that characterization. The Second Circuit's rejection of that decision—and its suggestion that a case may only be "exceptional" if the defendant has temporarily "transported [its] principle ‘home' to the [forum]"—confirms that the "exceptional case" is rare indeed.