Daimler AG v. Bauman

Daimler AG v. Bauman No. 11-965, 571 U.S. ___ (2014) is a United States Supreme Court case. In this case, the court answered whether an American court may exercise jurisdiction over a foreign company based on the fact that a subsidiary of the company acts on its behalf in the jurisdictional state.^[1] The court held that an American company cannot be sued for conduct occurring outside the United States and American courts do not have jurisdiction of such a claim.^[2]

Background

Daimler Aktiengesellschaft is a Stuttgart, Germany based automotive manufacturer that owns Mercedes-Benz and its subsidiaries around the world, included the United States and Argentina. During the Argentina Dirty War a labor dispute developed at the Mercedes-Benz plant in González Catán. Mercedes-Benz reported the labor leaders as ‘subversives’ to the right wing military junta, had junta forces stationed within the factory and allowed the junta to conduct raids on workers.^[3] Over the course of the dispute twenty-two labor leaders were kidnapped, tortured, and murdered. Afterwards the police chief responsible for the ‘disappearances’ was hired as Mercedes-Benz Argentina’s chief of security and the company provided his legal defense against human rights abuse accusations.^[4]

Twenty years later Mercedes-Benz’s role in Argentina’s Dirty War came to the attention of the German media. DaimlerChrysler AG responded to the accusations against its subsidiary by hiring Professor Christian Tomuschat to conduct an investigation.^[5] His exculpatory findings were criticized by Amnesty International.^[6]

In 2004 the survivors sued DaimlerChrysler AG in a San Francisco federal district court alleging that its subsidiary’s activities during Argentina’s Dirty War gave rise to claims under the Alien Tort Statute, the Torture Victim Protection Act, and California state tort law. The district court dismissed the suit for lack of personal jurisdiction, finding that DaimlerChrysler’s wholly owned subsidiary Mercedes-Benz USA is not an agent of its owner, and that it would be unreasonable to exercise jurisdiction directly over DaimlerChrysler. Plaintiffs appealed.

The Ninth Circuit affirmed, with Judge Steven Reinhardt, the most frequently reversed US Appeals Court judge, dissenting.^[7] Plaintiffs petitioned for a rehearing and, nine months later, the court granted the rehearing, vacated its earlier opinion and scheduled the case for reargument.^[8] However, the court then cancelled the reargument and instead released a new opinion, authored by Judge Reinhardt, that came to the opposite of its earlier conclusion.^[9] Judge Reinhardt reversed the district court, finding that Mercedes-Benz USA was indeed an agent of DaimlerChrysler and that the exercise of personal jurisdiction over DaimlerChrysler was reasonable “under the circumstances of this case”. DaimlerChrysler’s petition for a rehearing en banc was denied, with Judge Diarmuid O'Scannlain authoring a dissent joined by seven other judges.^[10] DaimlerChrysler (by then renamed Daimler AG) petitioned for a writ of certiorari from the United States Supreme Court and the petition was granted.

Opinion

The Supreme Court unanimously reversed, finding Judge Reinhardt’s exercise of personal jurisdiction over Daimler so “exorbitant” that it was an unconstitutional violation of the due process clause. Justice Ginsburg, in an opinion joined by seven other justices, begins by tracing the jurisprudential history of in personam jurisdiction, beginning with the rigid territorial limits of Pennoyer v. Neff (1878). She sees International Shoe Co. v. Washington (1945) as latter recognizing the distinction between specific jurisdiction, which includes only the specific conduct that connects the defendant to the territory, and general jurisdiction, which includes all the defendant’s acts anywhere, and Ginsburg ends the history with her recent admonition to exercise general jurisdiction only when the defendant is “essentially at home” in the forum in Goodyear Dunlop Tires Operations, S.A. v. Brown (2011).

The Court then finds that “in no event” can Reinhardt’s agency theory be sustained. Noting that even the plaintiffs’ brief had distanced itself from Reinhardt’s logic, the Court largely adopts the criticisms of the Ninth Circuit judges dissenting from the denial of an en banc rehearing. The Court even goes so far as to emphasize that Reinhardt’s formulation “stacks the deck” and would always have the same result of exercising jurisdiction.

Ginsburg then chooses to assume that Mercedes Benz USA is subject to general jurisdiction in California and, somewhat surprisingly, that Mercedes Benz USA is an agent of Daimler. Daimler still, however, cannot be subject to general jurisdiction because its agent’s activity in California can merely establishes specific jurisdiction in California. The Court then goes on to imply that a corporation can only be “at home” and subject to general jurisdiction where it is incorporated or where it has its principle place of business.

Lastly, the Court notes that recent cases have rendered federal claims for human rights violations “infirm”.^[11] Furthermore, the Court gives weight to the Solicitor General’s suggestion that “international rapport” may be damaged when US courts hear foreign corporations’ foreign misdeeds.

Concurrence in Judgment

Justice Sotomayor concurred in judgment only. Sotomayor agrees that Reinhardt’s opinion is clearly in error, and suggests that personal jurisdiction is simply unreasonable because Germany has a far greater interest in resolving the dispute. Other than the judgment, however, Sotomayor considers the Court’s opinion wrong in “both process and substance.” Procedurally Sotomayor feels that Ginsburg strayed beyond the question briefed and by simply assuming Mercedes Benz USA’s agency relationship an adequate factual record was not developed below. Substantively, Sotomayor feels that effectively limiting general jurisdiction to the principle place of business inherently favors larger businesses, making multinational corporations “too big for general jurisdiction”.

This, in her view, creates manifold injustices. It is unjust by using the Constitution to limit the states' sovereign prerogative over the exercise of their courts’ jurisdiction. It is unjust to small businesses in that they will be subject to instate general jurisdiction while their multinational competitors will not. It is unjust to individuals because when visiting a state a natural person can be served with process and become subject to general jurisdiction while a fictional person cannot, even if that fictional person is a multinational corporation who has permanent employees in the state. Finally, Sotomayor views the Court’s singular approach unjust because the result of limiting general jurisdiction is to shut the courthouse door, inevitably benefiting wrongdoers at the cost of those they have wronged.

Reaction

In the term Leading Cases section of the Harvard Law Review students noted Justice Ginsburg’s favorable citations of a Harvard Law Review article titled The Myth of General Jurisdiction.^[12]

References

External links

• SCOTUSblog case page
• Vanderbilt Law Review En Banc Roundtable case preview