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September 21, 2016 Articles

Third-Party Subpoenas and Personal Jurisdiction after Daimler v. Bauman

James M. Beck

In Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the U.S. Supreme Court restricted the principle of general personal jurisdiction (whereby a defendant can be sued about anything) involving corporations, limiting this concept to where a corporation is “at home”—essentially its principal place of business or state of incorporation. Id. at 760–61. Plaintiffs may, of course, still sue corporations in the plaintiff’s domicile provided that the litigation satisfies the “minimum contacts” test for specific personal jurisdiction, but Daimler makes it extremely difficult for a court in any jurisdiction not home to either the plaintiff or the defendant to obtain jurisdiction.

Federal Rule of Civil Procedure 45(b), drafted prior to Daimler, authorizes the issuance of subpoenas to third parties—including corporations—“any place within the United States,” without regard to where the entity being subpoenaed is at home. Pre-Daimler law established, however, that courts must have personal jurisdiction over the target of a subpoena in order to enforce it. E.g., First Am. Corp. v. Price Waterhouse LLP, 154 F.3d 16, 20 (2d Cir. 1998) (enforcement of subpoena must “comport with due process” including the “assertion of personal jurisdiction”); In re Sealed Case, 141 F.3d 337, 341 (D.C. Cir. 1998) (recognizing in Rule 45 context “[t]he principle that courts lacking jurisdiction over litigants cannot adjudicate their rights is elementary, and cases have noted the problem this creates for the prospect of transferring nonparty discovery disputes”); In re Application to Enforce Admin. Subpoenas, 87 F.3d 413, 418 (10th Cir. 1996) (nonparty target of administrative agency subpoena must have minimum contacts); Reinsurance Co. of Am. v. Administratia Asigurarilor de Stat, 902 F.2d 1275, 1281 (7th Cir. 1990) (“[a] court . . . , when authorized by statute or rule of court, may order a person subject to its jurisdiction to produce documents, objects, or other information relevant to an action”); Ariel v. Jones, 693 F.2d 1058, 1061 (11th Cir. 1982) (subpoena quashed “[i]n view of the minimal contacts of the [nonparty] with [the forum]”). See C. Wright & A. Miller, 9A Federal Practice & Procedure §2454, at 398–99 (3d ed. 2008) (“A corporation is amenable to service of a subpoena under Rule 45(b) in any forum in which it has sufficient minimum contacts.”); 16 Moore’s Federal Practice §108.125, at 108–48 (3d ed. 2008) (“[a] nonparty witness cannot be compelled . . . unless the witness is subject to the personal jurisdiction of the court”). This precedent indicates that Daimler should limit the enforceability of third-party subpoenas to the same extent that it restricts jurisdiction over corporate defendants.

The Second Circuit so held in Gucci America, Inc. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014), in the context of discovery in aid of execution. The plaintiff in Gucci was seeking assets hidden by product counterfeiters, and it subpoenaed information from a Chinese overseas bank in the Southern District of New York, where the banks had offices but were not “at home” under Daimler. After being held in contempt for resisting discovery and execution, the banks appealed. The Second Circuit held that, while there was jurisdiction over the alleged counterfeiters sufficient to freeze their assets, Gucci, 768 F.3d at 129–30, personal jurisdiction was lacking over the bank itself, so that the subpoena was unenforceable against it. “A district court . . . must have personal jurisdiction over a nonparty in order to compel it to comply with a valid discovery request under [Rule] 45.” Id. at 141 (footnote omitted).

[A] district court can enforce an injunction against a nonparty such as [subpoena target] only if it has personal jurisdiction over that nonparty. Following oral argument in this case, the Supreme Court decided Daimler. . . . [The target] asserts, in post-argument letter briefs, that in light of Daimler the district court erred in concluding that [it] was properly subject to all-purpose general jurisdiction. We agree. We also conclude, however, that this matter should be remanded so that the district court may consider whether it has specific jurisdiction.

Id. at 134 (citation omitted).

The target of the subpoena was not “at home” in the jurisdiction—it had only branch offices there—so “there is no basis consistent with due process for the district court to have exercised general jurisdiction over the Bank.” Id. at 135.

Gucci has been followed as controlling authority by other Second Circuit courts to prevent third-party discovery against nonresident corporate entities under Daimler. See Tiffany (NJ) LLC v. China Merchs. Bank, 589 F. App’x 550, 553 (2d Cir. 2014) (“a district court can enforce an injunction against a nonparty only if it has personal jurisdiction over that nonparty”); Motorola Credit Corp. v. Uzan, 132 F. Supp. 3d 518, 521 (S.D.N.Y. 2015) (third parties “are incorporated and maintain their principal places of business abroad, and no ‘exceptional circumstances’ exist that would otherwise support general jurisdiction”). But see Vera v. Republic of Cuba, 91 F. Supp. 3d 561, 571–71 (S.D.N.Y. 2015) (“permissive” post-judgment execution proceedings may proceed against nonparties even in the absence of personal jurisdiction), appeal quashed, 2016 WL 3135752 (2d Cir. June 3, 2016).

A similar result was reached in Leibovitch v. Islamic Republic of Iran, 2016 WL 2977273 (N.D. Ill. May 19, 2016), likewise initiated by plaintiffs who subpoenaed information from two foreign banks, for the purpose of executing on a judgment. Although both banks had branches in the forum state (which is probably why the plaintiffs chose that forum), they certainly did not have the kind of uniquely involved relationship with that state to be “at home.” Id. at *6. The plaintiffs argued that Daimler “only applies to defendants, and not to third parties.” Id. at *7.

Citing pre-Daimler precedent, the court rejected this argument. “[A] court must have personal jurisdiction to order compliance with a discovery request.” Id. at *5. Thus, discovery subpoenas could not be valid against those over which the forum could not exercise general jurisdiction (or specific jurisdiction, but that wasn’t the real point):

[T]he Court cannot discern any valid reason why Daimler would not apply any time the Court is called to decide personal jurisdiction. . . . This same rationale [requiring jurisdiction] applies to non-parties like the banks: they have been haled into a foreign court, required to obtain counsel to represent their interests, and risk the imposition of a judgment and/or sanctions if they fail to comply with Plaintiffs’ filings. For this reason, other courts have applied Daimler and earlier Supreme Court decisions addressing personal jurisdiction generally to cases involving third parties. If anything, one would think that a more restrictive standard should apply when assessing personal jurisdiction over non-parties, not a looser one, because unlike defendants they are not accused of violating the plaintiff’s rights and essentially have “no dog in the fight.”

2016 WL 2977273, at *7 (citations omitted). See also Yelp, Inc. v. Hadeed Carpet Cleaning, Inc., 770 S.E.2d 440, 443, 445–47 (Va. 2015) (concurring opinion) (subpoena against nonresident website operator unenforceable due to lack of personal jurisdiction).

Most of the cases applying Daimler have done so in the context of motions to dismiss brought by corporate defendants. However, under the generally accepted proposition that courts can only impose discovery sanctions against third parties over which they have personal jurisdiction, the restrictions on general personal jurisdiction recognized in Daimler would seem to be equally applicable to corporate targets of third-party subpoenas. Emerging precedent, while still relatively sparse, appears to support application of Daimler to third-party subpoenas. Because such subpoenas are commonplace in mass tort litigation, both plaintiffs and defendants in such litigation should pay close attention to Daimler’s jurisdictional limitations in choosing where, and how, to conduct third-party discovery.

Keywords: litigation, mass torts, general personal jurisdiction, third-party subpoena, Daimler AG v. Bauman

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