For many years, the Supreme Court’s jurisprudence on personal jurisdiction had incrementally expanded to a point at which most national or multinational corporations would probably assume that they could be sued almost anywhere. Dating back to a seminal case in 1945, the Court had broadly relied upon notions of “fair play and substantial justice” in concluding that certain “minimum contacts” could expose foreign corporations to the jurisdiction of courts located somewhere other than their home state. That departure from purely territorial jurisdiction ultimately led to two parallel strands – specific jurisdiction and general jurisdiction.
In an important decision issued just last month, however, the Court took a big step to pull back the reins on general jurisdiction. The decision in Daimler AG v. Bauman, 571 U.S. ___ (Jan. 14, 2014), makes clear that the Court increasingly disfavors the exercise of general jurisdiction, under which corporations could be subject to suit in virtually any state or forum where they arguably had “continuous and systematic” contacts. Rather, after Daimler, the basis for jurisdiction over a corporation in most cases must now relate in some way to the facts of the underlying case or claims.
This decision by a virtually unanimous Court, authored by Justice Ginsburg, is clearly a pro-business decision, and one that appears to reflect the Court’s desire to limit the use of wide-ranging forum shopping. It slows down an expansive trend that had been underway for more than 50 years, and makes clear that foreign corporations should typically be subject to suit in only two clear sets of circumstances. The most common situation arises out of so-called specific jurisdiction, where the events at issue, or the claims being made, arose out of the state or forum where the suit is filed. The other basis, traditionally known as general jurisdiction, will now be limited to locations in which the corporation is truly “at home” – typically states in which the corporation has been formed or has its principal place of business.
The facts of the Daimler case were very unusual, making the Court’s ultimate outcome probably easy to predict. In short, Argentine plaintiffs had filed suit in California under the Alien Tort Statute against a Mercedes-Benz affiliate for alleged acts of terror that took place in Argentina in the 1970s. The only tenuous connection to California was the existence of an affiliated corporate entity within that state. The District Court dismissed the case on jurisdictional grounds, given the slim connection to California, but the Ninth Circuit reversed, employing an “agency” theory to permit the claims to proceed.
While the Supreme Court’s reversal of the Ninth Circuit was not surprising on these extraordinary facts, the Court’s decision was nonetheless remarkable in many respects. Reaching beyond the facts of the case, the Court seized upon an opportunity to make certain broad statements limiting the reach of its jurisdictional doctrine. Eight justices from across the political and ideological spectrum joined in the opinion authored by one of the leaders of the Court’s liberal wing. Justice Sotomayor joined only in the outcome, but nonetheless made the ruling unanimous.
The Court outlined the evolution of its jurisdictional rulings since International Shoe Co. v. Washington, 326 U.S. 310 (1945), a case familiar to any law school student. In that case, the Court established the notion of “minimum contacts” as a touchstone for determining when a foreign corporation could be sued or “haled into court” in another jurisdiction. Following International Shoe, the Court’s jurisdictional doctrine evolved into the two now-familiar strands. Specific jurisdiction quickly became the “center piece of modern jurisdiction theory.” In that case, the fairness of a court’s exercise of jurisdiction over a foreign corporation is specifically derived from the location and impact of the underlying acts. The other strand, known as general jurisdiction, has historically been based on any corporate presence deemed “continuous and systematic.” But, such a test can easily become sweeping and limitless, and even subjective. As the Court noted, it had ultimately become “all-purpose jurisdiction.”
Recognizing this trend, and building upon its 2011 decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. ___ (2011), the Court reined in general jurisdiction and made clear that it should now “occupy a less dominant place in the contemporary [jurisdictional] scheme.” Hence, after Daimler, foreign corporations should generally be subject to suit in places other than the jurisdiction in which the underlying events occurred or had impact only when the suit has been filed where the corporation can truly be said to be “at home.” While the Court has not indicated whether that could potentially occur in jurisdictions other than those in which the company is incorporated or has its principal place of business, those limited circumstances appear to represent the paradigm for general jurisdiction. This retreat from a more expansive doctrine of general jurisdiction should not only provide greater fairness and predictability in instances in which jurisdiction is not clearly fact-specific or event-based, the Court said it is far more consistent with what International Shoe truly meant at the outset.
This is unmistakably a pro-business decision. But, remarkably, it is not limited to the narrow conservative majority of the Roberts Court, and it is not the sort of divisive 5-4 decision that all too often occurs in matters of great social or political consequence. Rather, it is a strong and pragmatic decision supporting the notion that corporations should enjoy some level of fairness, predictability and certainty with regard to the locations where they can fairly be sued and made subject to the enforceable decisions of the Federal courts.