Next steps


On April 22 2013 the Supreme Court granted review in a personal jurisdiction case: DaimlerChrysler AG v Bauman.(1) The question presented in DaimlerChrysler is:

"Whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State".

The Supreme Court previously granted certiorari in a specific personal jurisdiction case: Walden v Fiore.(2) The question presented in Walden is "[w]hether due process permits a court to exercise personal jurisdiction over a defendant whose sole 'contact' with the forum State is his knowledge that the plaintiff has connections to that State".

Both DaimlerChrysler and Walden arose from the Ninth Circuit. They will be argued in Autumn 2013, with a decision expected no later than the end of June 2014.(3)

Both of these cases are of significant interest to businesses, as personal jurisdiction delimits a court's ability to hail a defendant into court and subject that defendant to the court's power and punishment. The Supreme Court has frequently declined to engage in issues of personal jurisdiction. Indeed, until this pair of decisions during the 2010 term, the Supreme Court had not significantly addressed personal jurisdiction since 1987, when the court splintered in its decision governing specific personal jurisdiction in Asahi Metal Industry Co v Superior Court of Cal, Solano Cty.(4)

DaimlerChrysler addresses the standard for general personal jurisdiction based on imputing the contacts of in-forum subsidiaries to foreign parent corporations.

Walden addresses what it means for a defendant to "expressly aim" its conduct at a forum, such that a state has specific personal jurisdiction over an alleged intentional tortfeasor.

These two grants follow closely on the heels of the Supreme Court's June 2011 rulings in Goodyear Dunlop Tires Operations and J McIntyre Machinery, in which it limited the ability of state courts to assert personal jurisdiction over foreign defendants.(5)


DaimlerChrysler addresses the circumstances in which an in-state subsidiary's contacts with the forum state are sufficient for the forum state to have general jurisdiction over the foreign parent corporation.

In DaimlerChrysler the plaintiffs are residents of Argentina who allege human rights violations against them and their relatives at the hands of Argentina's military dictatorship during the 'dirty war' in the late 1970s and early 1980s. During that time the plaintiffs were employed by DaimlerChrysler's subsidiary in Argentina. The plaintiffs claimed that the Argentine subsidiary collaborated with the Argentine military in carrying out the alleged abuses. DaimlerChrysler is a German company that manufactures Mercedes-Benz automobiles in Germany. It does not manufacture, market or sell any products in the United States.

The plaintiffs filed suit in California, maintaining that DaimlerChrysler was subject to general personal jurisdiction in California – not because it was present in California, but rather on an agency theory by attributing to DaimlerChrysler the California contacts of a different, indirect subsidiary incorporated in Delaware (Mercedes-Benz USA LLC). The Delaware subsidiary takes title to the luxury cars in Germany and then distributes them in the United States, including through dealerships in California. The plaintiffs thus argued that DaimlerChrysler was subject to general jurisdiction in California based on the contacts that its Delaware subsidiary has with California and, as a result, the German parent company could be forced to defend itself in California against the human rights violations allegedly committed by its Argentine subsidiary in Argentina.

The district court permitted discovery into the jurisdictional question. The court found that there was no agency relationship and granted DaimlerChrysler's motion to dismiss for lack of personal jurisdiction.

In a curious turn of events at the Ninth Circuit, this decision was first affirmed in a divided panel opinion and subsequently reversed by the same panel nine months later. DaimlerChrysler's petition for rehearing en banc was denied, although eight judges dissented from that denial.

In the Ninth Circuit there are two separate tests for determining whether a subsidiary's contacts can be imputed to a parent corporation for general jurisdiction purposes. One test examines whether the subsidiary is merely an alter ego of the parent. The other test – the agency test – is at issue in DaimlerChrysler. This test requires two showings:

  • whether the subsidiary was established for, or is engaged in, activities that the parent would have to undertake itself but for the existence of the subsidiary; and
  • whether the parent effectively controls the subsidiary's internal affairs or day-to-day operations.(6)

The Second Circuit generally also applies this test.(7) Where the foreign defendant is a holding company that by definition does not conduct operations itself and can do business only through subsidiaries, the agency test ordinarily is not satisfied. Yet in the case at hand, the Ninth Circuit reformulated the agency test so that, as Judge O'Scannlain, dissenting from the denial of rehearing en banc, explained, the court "now seemingly rejects respect for corporate separateness, a well-established 'principle of corporate law deeply ingrained in our economic and legal systems'".(8)

At least five other circuits – the Fourth, Fifth, Sixth, Seventh and Eighth Circuits – have rejected the agency test for general jurisdiction. Those courts require the subsidiary to be an alter ego of the foreign parent – in other words, due process requires a plaintiff to show that the foreign parent controlled and dominated the day-to-day activities of its domestic subsidiary to the extent that the corporate form should be disregarded and the two should be treated as alter egos.(9) These circuits generally view the following as indicia of corporate separateness sufficient to reject imputing jurisdictional contacts of a domestic entity to a foreign parent:

  • separate books and records;
  • separate offices, bank accounts and tax returns;
  • separate boards of directors and employees;
  • observation of corporate formalities; and
  • proof that the domestic entity ran the actual day-to-day operations (eg, marketing and sales).(10)

The plaintiffs, now respondents before the court, argued that the facts – specifically, that DaimlerChrysler and its indirect, wholly owned Delaware subsidiary have the same chairman, sets prices for the cars sold in the United States and has rights under a distribution agreement to exert control over the subsidiary's business activities, as applied to the Ninth Circuit's agency test – support the holding below that DaimlerChrysler is subject to personal jurisdiction.

The plaintiffs also maintained that it was not unreasonable for DaimlerChrysler to defend itself in California in light of:

  • the revenue that it generates from sales in California;
  • the fact that it has litigated in the California courts;
  • the fact that it has a research centre in the state; and
  • the fact that it trades on the Pacific Stock Exchange.

The plaintiffs further noted that technological advancements have lessened the traditional burdens on foreign defendants litigating in the United States, and that neither Argentina nor Germany provided an adequate forum.


Walden addresses when a forum state has specific jurisdiction over an alleged intentional tortfeasor. In this case, the only contact between the tortfeasor and the forum state was its knowledge that the victims of its tort resided in the forum state.

The plaintiffs are two professional gamblers who were detained in Atlanta, Georgia by a Drug Enforcement Administration (DEA) agent. The plaintiffs' destination was Las Vegas, Nevada. The plaintiffs maintained that they were residents of both Nevada and California, but provided the DEA agent with California identification only. The DEA agent suspected that the significant amount of cash that the plaintiffs had in their possession – approximately $97,000 – was evidence of illegal narcotics transactions, rather than the legitimate proceeds of legal gambling. The DEA agent seized the money and subsequently filed a probable cause affidavit for forfeiture of the funds. Ultimately, the US Attorney's Office determined there was no probable cause for forfeiture and returned the money to the plaintiffs.

The plaintiffs brought suit in the US District Court for the District of Nevada against the DEA agent responsible for seizing the cash. The agent moved to dismiss for lack of personal jurisdiction, citing his absolute absence of contacts with the state: he had no contact with anyone in Nevada, owned no property there and conducted no personal business in the state. The district court dismissed the case for lack of personal jurisdiction.

The Ninth Circuit reversed in a divided opinion. The court held that Nevada had specific jurisdiction over the DEA agent. The Ninth Circuit concluded that the DEA agent had purposefully directed his conduct to the forum state (ie, Nevada) because he knew that the plaintiffs had a connection with Nevada at the time that the probable cause affidavit had been filed. Specifically, the appeal court held that the DEA agent had committed an intentional act – the filing of a false affidavit – expressly aimed at Nevada (where the plaintiffs resided). The court further concluded that the DEA agent's intentional act had foreseeable effects in the forum.

Eight judges of the Ninth Circuit dissented from the denial of a petition for rehearing en banc in two separate dissents. As Judge McKeown's dissent explained:

"With the stroke of a pen, our circuit returns to a discredited era of specific personal jurisdiction, where foreseeability reigns supreme and purposeful direction is irrelevant. That approach was, of course, rejected in Burger King Corp. v. Rudzewicz; the Supreme Court was unequivocal that 'foreseeability is not a sufficient benchmark for exercising personal jurisdiction.' 471 U.S. 462 (1985). Instead, the Due Process Clause requires that before a distant state exercises specific jurisdiction over a defendant, the defendant must purposefully direct activities at forum residents resulting in injuries arising out of or relating to those activities. Under the majority's construct, mere knowledge of the potential out-of-state plaintiff's residence, along with a wrongful act, confers specific personal jurisdiction. This virtually limitless expansion of personal jurisdiction runs afoul of both due process guarantees and Supreme Court precedent".

As the Ninth Circuit's opinions and the briefing at the certiorari stage suggest, the appeal courts have divided over what it means for a party to "expressly aim" its conduct at a forum state. At least six circuits have required that a defendant expressly aim its conduct at the forum state – not merely at a known forum resident.(11) Meanwhile, the Ninth Circuit and Eleventh Circuit have embraced a seemingly broader standard permitting specific personal jurisdiction where a defendant has undertaken intentional acts with the knowledge that the plaintiff resides in the forum state.(12) The Supreme Court in Walden aims to resolve this confusion.

Next steps

Briefing in both DaimlerChrysler and Walden will occur in Summer 2013 and the cases are likely to be argued in Autumn 2013. Decisions in the two cases will be handed down by June 2014.

The Supreme Court has demonstrated respect for corporate form in recent years and this likely will shape the court's consideration of DaimlerChrysler. Ultimately, if the Supreme Court reverses in these two cases, it will further limit the ability of state courts (and federal courts exercising diversity jurisdiction) to assert personal jurisdiction over non-state defendants. On the other hand, should the court affirm the Ninth Circuit in either decision, this would potentially open corporate defendants to broader assertions of jurisdiction, requiring corporate defendants to defend against a broader range of civil suits in more places.

Finally, because multinational companies generally organise themselves through separate corporations to achieve benefits ranging from limited liability to favourable tax treatment, those advising such companies should pay particular attention to the court's reasoning when it decides DaimlerChrysler. Should the court weaken the traditional principles of corporate separateness in any way, the consequences could be far broader than merely increasing the cost and burden of defending litigation in a foreign forum.

For further information on this topic please contact Grant J Esposito at Morrison & Foerster LLP's New York office by telephone (+1 212 468 8000), fax (+1 212 468 7900) or email ( Alternatively contact Brian R Matsui at Morrison & Foerster LLP's Washington DC office by telephone (+1 202 887 1500), fax (+1 202 887 0763) or email (


(1) No 11-965 (cert granted April 22 2013).

(2) No 12-574 (cert granted March 4 2013).

(3) Walden also presented a separate venue question: "Whether the judicial district where the plaintiff suffered injury is a district 'in which a substantial part of the events or omissions giving rise to the claim occurred' for purposes of establishing venue under 28 U.S.C. § 1391(b)(2) even if the defendant's alleged acts and omissions all occurred in another district." This update does not address this venue question.

(4) 480 US 102 (1987).

(5) See

(6) Doe v Unocal Corp, 248 F3d 915 (9th Cir 2001).

(7) Wiwa v Royal Dutch Petroleum Co, 226 F3d 88 (2d Cir 2000).

(8) Citing United States v Bestfoods, 524 US 51, 61 (1998).

(9) See Newport News Holdings Corp v Virtual City Vision, Inc, 650 F3d 423, 433 (4th Cir 2011); Jackson v Tanfoglio Giuseppe, SRL, 615 F3d 579, 586 (5th Cir 2010); Dalton v R & W Marine, Inc, 897 F2d 3 1359 (5th Cir 1990); Estate of Thomson v Toyota Motor Corp Worldwide, 545 F3d 357, 362 (6th Cir 2008); Central States, Southeast & Southwest Areas Pension Fund v Reimer Express World Corp, 230 F3d 934, 943-945 (7th Cir 2000); Viasystems, Inc v EBM-Papst St Georgen GmbH & Co, KG, 646 F3d 589, 596 (8th Cir 2011).

(10) Two other circuits effectively follow the alter ego approach, but those courts describe the test as one of 'agency'. The courts require a showing that the parent and subsidiary are so interrelated that they cannot in fairness be considered separate companies, which, in practice, is calling the two alter egos. See Miller v Honda Motor Co, 779 F2d 769, 773 (1st Cir 1985); Stubbs v Wyndham Nassau Resort & Crystal Palace, 447 F3d 1357, 1361 (11th Cir 2006); Consolidated Development Corp v Sherritt, Inc, 216 F3d 1286 (11th Cir 2000).

(11) See IMO Indus, Inc v Kiekert AG, 155 F3d 254 (3d Cir 1998); ESAB Grp, Inc v Centricut, Inc, 126 F3d 617 (4th Cir 1997); Panda Brandywine Corp v Potomac Elec Power Co, 253 F3d 865 (5th Cir 2001); Mobile Anesthesiologists Chicago, LLC v Anesthesia Assocs of Houston Metroplex, PA, 623 F3d 440 (7th Cir 2010); Johnson v Arden, 614 F3d 785 (8th Cir 2010); Dudnikov v Chalk & Vermilion Fine Arts, Inc, 514 F3d 1063 (10th Cir 2008).

(12) See Fiore v Walden, 688 F3d 558 (9th Cir 2012); Bancroft & Masters, Inc v Augusta Nat'l Inc, 223 F3d 1082, 1087 (9th Cir 2000); Licciardello v Lovelady, 544 F3d 1280 (11th Cir 2008).