Lessons from Daimler
On January 14, 2014, as one of the first decisions of the new year, the United States Supreme Court held that Daimler AG (“Daimler”) could not be sued in federal court in California for injuries allegedly caused by conduct of its Argentinian subsidiary when this conduct took place entirely outside of the United States.
The case arose out of a claim brought by twenty-two Argentinian residents alleging that during Argentina’s “Dirty War” in the 1970s and 1980s, Mercedes-Benz Argentina worked with state security forces to kidnap, torture, and kill workers, and seeking damages for human rights violations. After the plaintiffs brought suit in federal court in California, Daimler moved for lack of personal jurisdiction, which the district court granted. The Ninth Circuit eventually reversed with Judge Reinhardt, writing for the panel, asserting that an agency relationship existed between Mercedez-Benz USA (“MBUSA”), an indirect subsidiary of Daimler, and considerations of reasonableness did nor bar exercise of general jurisdiction.
In the Supreme Court, the majority reversed the decision of the Ninth Circuit. They rejected Judge Reinhardt’s agency relationship reasoning, noting that the Ninth Circuit’s conception of agency theory for personal jurisdiction would be sweeping and always yield a “pro-jurisdiction answer.” The Court went even further to say that even if MBUSA’s contacts were attributable to Daimler, Daimler still did not have enough contact to render general jurisdiction. Relying on Goodyearand International Shoe, the Court asserted that the correct inquiry for a foreign corporation was not whether the corporation’s in-forum contacts could be “in some sense ‘continuous and systematic’ but whether the affiliations with the State are so ‘continuous and systematic’ as to render it essentially at home in the forum state.” The Court found that the Ninth Circuit erred in finding personal jurisdiction, for two main reasons. First, neither Daimler nor MBUSA was incorporated in California nor had a principle place of business in California. Second, consideration had to be had of international comity in cases involving foreign governments.
Given the oral arguments, the decision from the overwhelming majority is unsurprising – almost all the justices expressed skepticism at the plaintiff’s attorney’s arguments. Moreover, as evidenced from the questions and the opinion, the Court expressed strong reservations about the sweeping nature of Judge Reinhardt’s Ninth Circuit opinion and the desire to limit forum shopping for litigants.
Nevertheless, for those who had hoped, or even wished, for the Supreme Court to clarify the jurisprudence in favour of foreigners who bring suit in the United States in the wake of Kiobel, the Daimler opinion was a disappointment and has similarly far-reaching repercussions compared to Kiobel. Justice Ginsburg’s opinion rejected the notion that the U.S. federal courts had a particular interest in international human rights (briefly mentioning Kiobel) and limited the importance of agency theory and corporate liability, relying on the level of contact in determining personal jurisdiction.
However, Daimler serves as a lesson for those who want to access U.S. federal courts. Justice Ginsburg’s opinion emphasises the tangential connection between MBUSA, Daimler, and California. This suggests that other states might have served as options as the Court emphasised that California as a state had such tangential contacts that there could not have been general jurisdiction. However, given the criteria of principal place of business and headquarters, this suggests that if the plaintiffs had brought suit in Michigan, or another state, the suit would not have been dismissed based on personal jurisdiction. While Ginsburg’s opinion limits the ability to bring suit compared to the Ninth Circuit’s sweeping opinion, the framework provided by Goodyear and Daimler may provide future litigants more clarity in where and how to bring suit so that the case could move beyond the procedural hurdles and to the merits and the real issues of the case.