In Daimler AG v. Bauman,1 the United States Supreme Court unanimously rejected Argentinean residents’ claims against a German company, Daimler, for human rights violations allegedly committed during Argentina’s “Dirty War” by Daimler’s Argentinian subsidiary (“MB Argentina”). Even though Daimler’s independent subsidiary in California, Mercedes-Benz USA, LLC (“MBUSA”), had contacts in California — which the Court assumed could be attributed to Daimler — the Court held such contacts were not sufficiently “continuous and systematic” to grant a California court personal jurisdiction over Daimler for MB Argentina’s conduct, which was “entirely outside the United States.”

In addition to clarifying the Court’s views on the outer limits of general jurisdiction over large multinational companies, the Daimler decision also addressed the Alien Tort Statue (“ATS”), under which the human rights claims were brought. The decision can be seen as a follow-up to the Court’s significant limiting of the extraterritorial reach of the ATS in its April 2013 decision in Kiobel v. Royal Dutch Petroleum Co.2 Daimler will further constrain efforts to assert personal jurisdiction in US courts over foreign conduct by foreign corporations based solely on the presence of subsidiaries and affiliates in the US.

Background

The plaintiffs, twenty-two Argentinean residents, filed suit in California against Daimler, alleging that Daimler’s Argentinian subsidiary collaborated with security forces during Argentina’s 1976-1983 “Dirty War” to kidnap, torture and kill certain MB Argentina workers. The plaintiffs claimed jurisdiction over Daimler in California on the basis of the commercial activity of MBUSA, which distributes Daimlerproduced vehicles to independent dealerships throughout the United States, including California.

Daimler moved to dismiss the lawsuit for lack of personal jurisdiction. The court granted Daimler’s motion to dismiss, finding that Daimler’s affiliations with California were insufficient to support general jurisdiction, and that plaintiffs failed to show that MBUSA acted as Daimler’s agent. Although the Supreme Court’s decision in Kiobel came down in between, on appeal, the Ninth Circuit Court of Appeals reversed the District Court.3 Basing its decision on an agency theory of general jurisdiction, the Ninth Circuit reasoned that MBUSA’s services were so “important” to Daimler that Daimler would be ready to perform those same services even if MBUSA did not exist.4 The Ninth Circuit’s reliance on the agency theory of jurisdiction diverged from five other circuits that require a subsidiary to be an alter ego of a parent in order to bring the parent under the court’s jurisdiction. The Supreme Court granted certiorari in April 2013.

Supreme Court Decision

Justice Ginsberg, writing for the majority, found that in the absence of any California connection to the alleged underlying conduct, perpetrators, or victims that would permit specific jurisdiction, general jurisdiction can be invoked to sue a defendant for activities it has committed anywhere when “the corporation’s affiliations with the State in which the suit is brought are so constant and pervasive “as to render [it] essentially at home in the foreign state.”5

The Court observed that the Ninth Circuit’s agency theory — which gauged MBUSA’s “importance” to Daimler on the basis of Daimler’s readiness to perform MBUSA’s services if MBUSA did not exist— was too broad and would expose foreign corporations to suit on any or all claims “wherever they have an in-state subsidiary or affiliate.”6 Such an outcome, the Court concluded, would extend beyond the approach to general jurisdiction it rejected in its recent decision in Goodyear Dunlop Tires Operations, S.A. v. Brown.7

Even assuming that MBUSA’s contacts with California could be imputed to Daimler, the Court concluded, a California court would still have no ground for asserting jurisdiction over Daimler.8 Following Goodyear, the Court in Daimler held that to establish general jurisdiction, a court must assess whether the foreign company’s affiliations with a state are so “continuous and systematic” so as to render it “at home” in the forum state.9 Paradigms of such “homes,” the Court noted in Goodyear, are the forums where a corporation is incorporated and has its principal place of business.10

Neither Daimler nor MBUSA were incorporated in California or had their principal place of business there. In the Court’s view, if these limited contacts would allow Daimler to be sued in California, then Daimler would be amenable to the suit “in every other State in which MBUSA’s sales are sizable.”11 The Court rejected such a “grasping” view of general jurisdiction and concluded that California could not exercise jurisdiction over Daimler. 12

Justice Sotomayor’s concurrence sought to lower the high bar the majority set, arguing that it would be more consistent with the Court’s jurisprudence (e.g., Goodyear) to focus simply on the magnitude of Daimler’s contacts with California, rather than compare those California contacts with Daimler’s extensive nationwide and worldwide operations (as the majority noted, “a corporation that operates in many places can scarcely be deemed at home in all of them”13). The majority’s approach, in her view, will allow large companies that separate their operations across states to escape accountability for their acts, whether committed at home or abroad, simply because they cannot be found to be at home in any one forum. In this sense, in Justice Sotomayor’s view, the majority had deemed Daimler “too big for general jurisdiction.”14

Impact on ATS and TVPA Claims

In dictum, the Court addressed the impact of Daimler on ATS and TVPA claims, which the Court quickly dismissed as having already been made “infirm” in light of its other recent decisions in Kiobel and Mohamad v. Palestinian Authority.15

While the majority opinion in Kiobel concluded that the ATS would not reach such a suit— mere corporate presence with no other US connection— both the majority and concurring opinions in Kiobel contemplated that the door could still be open for the applicability of the ATS to cases with a more substantial connection to the US.16

The Court’s decision in Daimler has further limited the application of the ATS. The high jurisdictional standard will likely prevent many potential cases against foreign defendants from being heard in US courts without a specific connection to the forum where the suit is brought. This result seems largely driven by the Court’s concerns about international comity and deference to the Executive branch, which some of the justices gave voice to first in Sosa v. Alvarez-Machain17 and more recently in Kiobel.18 Justice Ginsburg’s opinion echoed this concern, pointing to the Solicitor General’s observations that foreign governments objected to several US courts’ expansive views of general jurisdiction as having “impeded negotiations of international agreements on the reciprocal recognition and enforcement of judgments.”19 Such considerations of “international rapport,” the Court concluded, reinforced its decision that subjecting Daimler to jurisdiction in California would violate the Constitutional demand for “fair play and substantial justice.”20