Daimler AG v. Bauman, 571 U.S. ___ (2014) [click for opinion]
Several Argentine residents sued DaimlerChrysler Aktiengesellschaft, a German company, alleging vicarious liability for human-rights violations committed by its Argentinian subsidiary during the country's "Dirty War" (1976-83). The suit was brought in the Northern District of California under the Alien Tort Statute and the Torture Victims Protection Act. Daimler filed a motion to dismiss for lack of personal jurisdiction, which the district court granted. The Ninth Circuit, sitting en banc, reversed.
The Ninth Circuit ruled that Daimler was subject to general (a.k.a. all-purpose) jurisdiction on the basis of its American subsidiary's contacts with California. The parties had stipulated that the subsidiary, which was incorporated in Delaware and had its principal place of business in New Jersey, was subject to general jurisdiction in California. The Ninth Circuit then applied an agency theory, under which a subsidiary's contacts may be attributed to a foreign parent corporation so long as the subsidiary's services are important enough that, absent the subsidiary, the parent's own officials would perform them. The subsidiary serves as Daimler's exclusive importer and distributor in the United States, with California sales accounting for 2.4% ($4.6 billion) of Daimler's sales worldwide. The Ninth Circuit concluded that Daimler would perform these services on its own if not for the subsidiary; thus the subsidiary's contacts could be imputed to Daimler.
The Supreme Court reversed. It began by reiterating what it said about general jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846 (2011). The doctrine of general jurisdiction permits a court to exercise personal jurisdiction over a foreign defendant for all claims, even those not related to the defendant's contacts with the forum state—hence the nickname "all-purpose jurisdiction." Before Goodyear, the test for general jurisdiction was whether the defendant's contacts with the forum state were "continuous and systematic." The Court clarified in Goodyearthat a corporation may be subject to general jurisdiction only where its contacts with the forum state are so constant and pervasive as to render it essentially "at home." The paradigmatic general-jurisdiction forums for a corporation are its place of incorporation and its principal place of business. Neither Daimler nor its American subsidiary fits that bill.
The Court also thought the Ninth Circuit's agency theory swept too broadly. Anything a corporation does through a subsidiary is presumably something the corporation would do on its own if the subsidiary did not. The agency theory would therefore subject foreign corporations to general jurisdiction wherever they have an in-state subsidiary or affiliate, "an outcome that would sweep beyond even the 'sprawling view of general jurisdiction' we rejected in Goodyear." Consequently, even if Daimler's subsidiary were subject to general jurisdiction in California (something the parties had stipulated to), Daimler itself would not be at home there.
Finally, the Court expressed concern that the Ninth Circuit's approach would create "international friction," as foreign investors would be discouraged from doing business in the United States and foreign governments would be reluctant to negotiate international agreements on the reciprocal recognition and enforcement of judgments. The Ninth Circuit's expansive view of general jurisdiction, the Court concluded, "would not accord with the 'fair play and substantial justice' due process demands."