The Supreme Court explained that a corporation is not “at home” everywhere it does substantial business, effectively abrogating many state laws that authorize exercise of personal jurisdiction against any out-of-state company found to be “doing business” in the state. Instead, the Court has largely constrained the exercise of general personal jurisdiction over a corporation to the state where it is incorporated or has its principal place of business.1 In addition, the Court severely curtailed plaintiffs’ ability to use a subsidiary’s presence in the forum state to claim jurisdiction over a foreign or out-of-state parent corporation.
Daimler AG is a German company that manufactures Mercedes Benz vehicles in Germany and markets them worldwide through subsidiaries. In 2004, 22 Argentinian plaintiffs sued Daimler in the Northern District of California. Asserting violations of the Alien Tort Statute and the Torture Victim Protection Act, as well as claims for wrongful death and intentional infliction of emotional distress, the plaintiffs alleged that, between 1976 and 1983, Daimler’s subsidiary, Mercedes-Benz Argentina, collaborated with Argentinian forces to harm plaintiffs and their relatives.
The plaintiffs asserted that, although they were foreigners and the events at issue occurred outside California, the court nonetheless had jurisdiction over Daimler based on Daimler’s own limited presence in California and on the presence of Daimler’s indirect subsidiary, Mercedes-Benz USA (MBUSA)—Daimler’s exclusive importer and distributor in the United States. With respect to Daimler, the plaintiffs alleged that the company was listed on the Pacific Stock Exchange in California and engaged in litigation and other activities in California. With respect to MBUSA, the plaintiffs characterized it as Daimler’s agent for jurisdictional purposes. MBUSA is a Delaware corporation with its principal place of business in New Jersey, but it has multiple facilities in California and is the largest supplier of luxury vehicles to the California market.
The district court granted Daimler’s motion to dismiss, concluding that Daimler’s own contacts with California were insufficient to support general jurisdiction and that MBUSA’s presence in California was irrelevant because it was not Daimler’s agent. The Ninth Circuit reversed. The court of appeals concluded that MBUSA acted as Daimler’s agent, and therefore MBUSA’s contacts with California could be imputed to Daimler. In reaching this conclusion, the Ninth Circuit considered whether the subsidiary “performs services that are sufficiently important to the foreign corporation” so that, in the subsidiary’s absence, “the corporation’s own officials would undertake to perform substantially similar services.”2
The Supreme Court’s Decision
The Supreme Court reversed, in an opinion by Justice Ginsburg joined by seven other justices. The Court held that “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.”3 Drawing heavily upon her 2011 opinion in Goodyear,4 Justice Ginsburg rejected the argument that general jurisdiction is proper “in every State in which a corporation ‘engages in a substantial, continuous, and systematic course of business.’”5 Rather, she explained, general jurisdiction over a corporation is limited to those places where the corporation could be considered “at home.” The paradigm locations, the Court said, are the state of incorporation and the principal place of business.6
Because Daimler was not incorporated in California and did not have its principal place of business there, the Court concluded that it could not be said to be “at home” in California. Thus, the Court explained, even assuming that MBUSA was “at home” in California and that MBUSA’s contacts with California could be imputed to Daimler, jurisdiction over the parent German company was improper.7
The Court also held that the Ninth Circuit’s “agency theory” was unacceptably broad because it “appears to subject foreign corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate.”8 By contrast, the Court emphasized, other courts of appeals have imputed a subsidiary’s jurisdictional contacts to the parent only when the subsidiary can be considered the parent company’s alter ego.9
Justice Sotomayor concurred in the result, but disagreed with the majority’s analysis, accusing the Court of fashioning a novel rule of constitutional law.10 Justice Sotomayor would have rejected jurisdiction as unreasonable “in light of the unique circumstances of this case,” without deciding whether Daimler’s contacts with California were sufficient to support general jurisdiction.11
Potential Ramifications and Recommendations
Daimler curtails drastically courts’ ability to assert general jurisdiction over out-of state corporations. The Court rejected as “unacceptably grasping” the concept of finding general jurisdiction where an out-of-state corporation engages in such continuous and systematic activity within a state that it can be said to be “doing business” there.12 In doing so, the Court effectively invalidated the approach followed by many states and lower courts.13 Now, in order for a corporation to be subject to general jurisdiction, it must be “at home” in a state—a test that, the Court emphasized, is not synonymous with “doing business.”14 As a result, Daimler limited the forums that have general jurisdiction over a corporation to essentially two locations: the state of incorporation and the principal place of business.15
Although the Court left open the possibility of “an exceptional case” where another court may exercise general jurisdiction based on the corporation’s operations in that forum, the plaintiff would have to show that the corporation is so connected to the forum state as to be “at home” there.16 This requirement would be very hard to meet, especially given the Court’s instruction that general jurisdiction requires “an appraisal of a corporation’s activities in their entirety, nationwide and worldwide,” and that some in-state contacts should not give a state authority over a corporation’s conduct that is unconnected to such in-state activity.17
Daimler effectively immunizes foreign corporations—those that are incorporated outside of the United States and have their principal place of business abroad—from suit in the United States based on general jurisdiction (though they would remain subject to specific jurisdiction related to events occurring in or affecting a state). In fact, the Court’s decision stems, in part, from its continuing hostility towards efforts to make US courts into judicial forums for claims arising out of foreign events.18 And Daimler enables US-based corporations to defeat assertion of general jurisdiction in states other than their state of incorporation or principal place of business.
Daimler, however, does not change the Court’s approach to specific jurisdiction—a separate category of jurisdiction.19 Where a plaintiff meets certain established requirements and shows that it would be reasonable, specific jurisdiction permits a forum to assert jurisdiction over a foreign defendant based on that defendant’s forum-related activity if that activity also gave rise to the plaintiff’s claim. While allowing greater balancing than in the general jurisdiction analysis, due process also constrains a court’s exercise of specific jurisdiction, and the Supreme Court’s recent decisions insisted on a strict enforcement of those limits where a forum tries to extend its authority over a foreign defendant.20
States and municipalities may try to legislate around Daimler by requiring a corporation wishing to do business in the state or with the municipality to agree to subject itself to general jurisdiction in that state’s courts. The Supreme Court, however, has looked with disfavor upon attempts by states to extract a waiver of constitutional rights or restrictions (such as, for example, the right to remove a case to federal court) as a condition of doing business in the state.21 Though the contours of this case law are ill-defined, the same rationale may protect corporations from being forced to waive the constitutional due process right not to be sued in a forum that lacks general jurisdiction.
Daimler also renders largely inoperative the agency theory of personal general jurisdiction, except where the corporate subsidiary is the parent company’s alter ego. Although the Court ostensibly declined to invalidate the agency theory, it found no general jurisdiction over Daimler in California (because it was not “at home” there) despite assuming (for the purposes of the case) that Daimler’s subsidiary, MBUSA, was “at home” in California and that MBUSA’s contacts could be attributed to Daimler.22 While companies may encounter continuing efforts by plaintiffs to assert the agency theory of general jurisdiction, Daimler makes it easier to defeat such efforts where corporate formalities are observed.
Finally, the Daimler decision could affect judgment enforcement proceedings. Turnover proceedings, where a court orders a defendant-judgment debtor (or a third party) to turn over to the plaintiff-judgment creditor the debtor’s property that may otherwise be difficult to reach, are often predicated on the court’s general jurisdiction over the debtor or third party. Following Daimler, a corporate defendant may be able to argue that the only courts with jurisdiction to order turnover of property are courts in the state where the corporation is “at home.” This could be a powerful defense for corporations facing proceedings in states whose turnover laws authorize a court to order delivery of the judgment debtor’s out-of-state property.23
While the majority opinion in Daimler sought to portray the decision as merely a reaffirmation of settled jurisdictional principles, it could have a potentially transformative effect. Daimler strengthens the ability of foreign corporations and corporations with nationwide activity to avoid judicial proceedings in inhospitable forums or liability based on their subsidiaries’ conduct. Plaintiffs will become more likely to rely on specific jurisdiction in shopping for favorable forums, but the prevailing rule is that specific jurisdiction must be established for each claim.24 While plaintiffs may test the limits of the Daimler bright-line test for general jurisdiction, the battleground will increasingly shift to questions of whether each of the plaintiffs’ claims can satisfy the requisites of specific jurisdiction.
1. As explained below, the Court’s opinion leaves specific personal jurisdiction intact under the analysis of International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny.
2. Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 920 (9th Cir. 2011), rev’d, Daimler AG v. Bauman, 134 S. Ct. 746, 759 (2014).
3. Daimler, 134 S. Ct. at 760.
4. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).
5. Daimler, 134 S. Ct. at 760–61 & n.19 (citation omitted).
6. Id. at 760.
7. Id. at 761–62.
8. Id. at 759–60.
9. Id. at 759.
10. Id. at 773 (Sotomayor, J., concurring in the judgment).
11. Id. at 763 (Sotomayor, J., concurring in the judgment).
12. Id. at 760–61.
13. See, e.g., Frummer v. Hilton Hotels Int’l, Inc., 227 N.E.2d 851, 853 (N.Y. 1967) (applying one of New York’s jurisdictional statutes, N.Y. C.P.L.R. 301).
14. Daimler, 134 S. Ct. at 762 n.20 (“A corporation that operates in many places can scarcely be deemed at home in all of them.”).
15. Id. at 761–62.
16. Id. at 761 n.19.
17. Id. at 762 n.20; see also id. at 763–64 (Sotomayor, J., concurring in the judgment).
18. See id. at 762–63 (citing Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013)).
19. See Daimler, 134 S. Ct. at 754 (discussing Int’l Shoe Co. v. Washington, 326 U.S. 310 (1945)).
20. See J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011); Walden v. Fiore, 134 S. Ct. 1115 (2014).
21. See, e.g., Terral v. Burke Const. Co., 257 U.S. 529, 532 (1922); see also Hanover Fire Ins. Co. v. Carr, 272 U.S. 494, 517 (1926).
22. Daimler, 134 S. Ct. at 759, 761–62.
23. See, e.g., Koehler v. Bank of Bermuda Ltd., 911 N.E.2d 825, 827 (N.Y. 2009) (construing New York’s turnover statute).
24. See 5B Charles Wright & Arthur Miller, Federal Practice and Procedure § 1351, at 299 n.30 (“the existence of personal jurisdiction for one claim will not provide the basis for another claim”); Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 274–75 (5th Cir. 2006).