The U.S. Supreme Court rued last week that defendant DaimlerChrysler Corp. could not be sued in in California over an Argentine subsidiary’s alleged tortious conduct under the theory of general jurisdiction.  See Daimler AG v. Barbara Bauman et al., No. 11-965 (U.S. 1/14/14).

Plaintiffs were twenty-two residents of Argentina who filed suit in California Federal District Court, naming as a defendant DaimlerChrysler Aktiengesellschaft (Daimler),a German public stock company that is the predecessor to the petitioner, Daimler AG.  Their complaint alleged that Mercedes-Benz Argentina (MB Argentina), an Argentinian subsidiary of Daimler, engaged in various illegal conduct respecting unions from 1976 to 1983 in Argentina. Personal jurisdiction over Daimler was predicated on the California contacts of Mercedes-Benz USA, LLC (MBUSA), yet another Daimler subsidiary, one incorporated in Delaware with its principal place of business in New Jersey.  (MBUSA distributes Daimler-manufactured vehicles to independent dealerships throughout the United States, including California.)  

Daimler moved to dismiss the action for want of personal jurisdiction. Opposing that motion, plaintiffs argued that jurisdiction over Daimler could be founded on the California contacts of MBUSA. The District Court granted Daimler’s motion to dismiss. Reversing the District Court’s judgment, the Ninth Circuit held that MBUSA, which it assumed to fall within the California courts’ all-purpose jurisdiction, was Daimler’s “agent” for jurisdictional purposes, so that Daimler, too, should generally be answerable to suit in that State. Daimler moved for cert.

The Supreme Court held that Daimler was not amenable to suit in California for injuries allegedly caused by conduct of MB Argentina that took place entirely outside the United States.

California’s long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U. S. Constitution. Thus, the inquiry here became whether the Ninth Circuit’s holding comported with the limits imposed by federal due process. International Shoe distinguished exercises of specific, case-based jurisdiction from a category known as “general jurisdiction,” exercisable when a foreign corporation’s continuous corporate operations within a state are so substantial and of such a nature as to justify suit against it even on causes of action arising from dealings entirely distinct from those activities. Since International Shoe, specific jurisdiction has become the centerpiece of modern jurisdiction theory. The Supreme Court’s general jurisdiction opinions, in contrast, have been few.

The Court said that even assuming, for purposes of this decision, that MBUSA qualifies as at home in California, Daimler’s affiliations with California were not sufficient to subject it to the general jurisdiction of that State’s courts. Whatever role "agency" theory might play in the context of general jurisdiction, the Court of Appeals’ analysis in this case could not be sustained. The Ninth Circuit’s agency determination rested primarily on its observation that MBUSA’s services were “important” to Daimler, as gauged by Daimler’s hypothetical readiness to perform those services itself if MBUSA did not exist. But if  mere “importance” in this sense were sufficient to justify jurisdictional attribution, observed the Court, foreign corporations would be amenable to suit on any or all claims wherever they have an in-state subsidiary or affiliate, an outcome that would sweep beyond even the sprawling view of general jurisdiction the Court has rejected in cases like Goodyear.  

Even assuming that MBUSA was at home in California and that MBUSA’s contacts were imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California, said the Court. The paradigm all-purpose forums for general jurisdiction are a corporation’s place of incorporation and principal place of business.  Plaintiffs’ reasoning, however, would reach well beyond these exemplar bases to approve the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business. The Court felt that the words “continuous and systematic,” were misread by plaintiffs and the Court of Appeals; they were used in International Shoe to describe situations in which the exercise of specific jurisdiction would be appropriate. See 326 U. S., at 317. With respect to all-purpose jurisdiction, International Shoe spoke instead of  instances in which the continuous corporate operations within a state were so substantial and of such a nature as to justify suit on causes of action arising from dealings entirely distinct from those activities.  Id., at 318. Accordingly, the proper inquiry, the Court explained, was whether a foreign corporation’s affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.

Neither Daimler nor MBUSA was incorporated in California, nor did either entity have its principal place of business there. If Daimler’s California activities sufficed to allow adjudication of this Argentina-rooted case in California, the same global reach would presumably be available in every other State in which MBUSA’s sales were sizable. No decision of the Supreme Court ever sanctioned a view of general jurisdiction so grasping. The Ninth Circuit, therefore, had no warrant to conclude that Daimler, even with MBUSA’s contacts attributed to it, was at home in California, and hence subject to suit there on claims by foreign plaintiffs having nothing to do with anything that occurred or had its principal impact in California.

The Court referred to the "transnational context" of the dispute, essentially making the point that U.S. courts are not suppose to be widely open to cases being brought against foreign companies when the underlying facts of the case have essentially nothing to do with the U.S.  The Supreme Court now has confirmed that general jurisdiction is typically limited to a jurisdiction companies can expect to be sued in, essentially where they are at home.