Thursday, January 23, 2014

SCOTUS Decision in Daimler AG v. Bauman: Constitutional Limits on General Jurisdiction

Last week the Supreme Court issued its decision in Daimler AG v. Bauman, a case covered earlier here and here and here. In many ways, the case resembles Kiobel v. Royal Dutch Petroleum, last Term's decision on the Alien Tort Statute (ATS). The Daimler plaintiffs had brought claims under the ATS against Daimler—a German company headquartered in Stuttgart—for human rights and other violations committed by Daimler's Argentinian subsidiary during the "dirty war" of the 1970s and 1980s. The Supreme Court's decision in Daimler, however, is all about personal jurisdiction, and it is not limited to the ATS context.

The Ninth Circuit had held that Daimler was subject to general personal jurisdiction in California based on the activities of its American subsidiary, MBUSA. Because it involves general jurisdiction, Daimler is an important follow-up to the Court's 2011 decision in Goodyear Dunlop v. Brown. Writing for a unanimous Court in Goodyear, Justice Ginsburg explained that general jurisdiction over corporations is proper "when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State."

In Daimler, all nine Justices conclude that it would be unconstitutional for California to exercise general jurisdiction over Daimler. Justice Ginsburg again writes for the Court, although Justice Sotomayor writes a separate concurrence that disagrees with much of Justice Ginsburg's reasoning. Parts of the decision—and some of the areas of disagreement—are harder than usual to follow because the parties either conceded or forfeited a number of potentially important points during the course of the litigation [see p.15]. That said, the most significant parts of the Daimler decision address three issues:

(1) When can a subsidiary's activities in the forum state be attributed to the parent for purposes of general jurisdiction?

(2) More generally, when is a corporation subject to general jurisdiction under the Goodyear standard?

(3) What role (if any) do the so-called "reasonableness" factors play in the general jurisdiction context?

The majority opinion does not provide much affirmative guidance on the first question, although Justice Ginsburg rejects the Ninth Circuit's approach. The Ninth Circuit had attributed MBUSA's contacts to Daimler using an "agency theory," which "rested primarily" on the premise that "MBUSA's services were 'important' to Daimler, as gauged by Daimler's hypothetical readiness to perform those services itself if MBUSA did not exist." [p.17] Justice Ginsburg reasons that this view "stacks the deck, for it will always yield a pro-jurisdiction answer." [p.17]. Nor—on these facts—could attribution be based on Daimler's "control" over MBUSA. According to the Ninth Circuit, the "requisite 'control'" had been demonstrated by Daimler's contractual "right to oversee certain of MBUSA's operations, even though that agreement expressly disavowed the creation of any agency relationship." [p.17, n.15] That is insufficient, according to Justice Ginsburg. She emphasizes, however, that a different approach to agency might be required in the context of specific jurisdiction. [p.16, n.13]

Justice Ginsburg's answer to the second question—if taken to its logical extent—may make the attribution question largely irrelevant, at least for large multinationals like Daimler. In Part IV-B of the opinion, Justice Ginsburg writes that even if one assumes both that MBUSA would be subject to general jurisdiction in California and that MBUSA's contacts areimputable to Daimler, general jurisdiction over Daimler still would not be proper. [p.18]. Even with these assumptions, of course, California would not be one of Daimler's paradigmatic fora for general jurisdiction. Those paradigms are a corporation's principal place of business and its state of incorporation. Justice Ginsburg acknowledges in Daimler, however,that these are not the only places where a corporation can be subject to general jurisdiction. [p.19] But what other places might qualify?

Daimler certainly does not bode well for plaintiffs seeking to find such a place. The only concrete example Justice Ginsburg provides is the 1952 classic Perkins v. Benguet Consolidated Mining (the implications of which are one of several matters of dispute between the majority and Justice Sotomayor). Justice Ginsburg indicates that it would be an "exceptional case" where "a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State." [p.20 n.19] She also rejects an approach that would allow general jurisdiction "in every State in which a corporation engages in a substantial, continuous, and systematic course of business." [p.19] It is not clear, however, that rejecting such an approach justifies rejecting general jurisdiction given the assumptions underlying this part of the opinion. As Justice Sotomayor explains: "[I]f MBUSA’s California contacts are so substantial and the resulting benefits to MBUSA so significant as to make MBUSA 'at home' in California, the same must be true of Daimler when MBUSA’s contacts and benefits are viewed as its own." [Concurring Op., p.12] Arguably, this scenario describes contacts with the forum that are even stronger than "engaging in a substantial, continuous, and systematic course of business."

Indeed, Justice Sotomayor sees another principle animating the majority's reasoning: a "new rule that in order for a foreign defendant to be subject to general jurisdiction, it must not only possess continuous and systematic contacts with a forum State, but those contacts must also surpass some unspecified level when viewed in comparison to the company’s nationwide and worldwide activities." [Concurring Op., p.13] In an especially noteworthy line, Justice Sotomayor writes: "In recent years, Americans have grown accustomed to the concept of multinational corporations that are supposedly 'too big to fail'; today the Court deems Daimler 'too big for general jurisdiction.'" [Concurring Op., p.2]

A third significant issue involves what have come to be known as the "reasonableness" factors. Justice Sotomayor explains: "Our personal jurisdiction precedents call for a two-part analysis. The contacts prong asks whether the defendant has sufficient contacts with the forum State to support personal jurisdiction; the reasonableness prong asks whether the exercise of jurisdiction would be unreasonable under the circumstances." [Concurring Op., p.3]. Factors relevant to the second prong include: "the burden on the defendant, the interests of the forum State, the plaintiff 's interest in obtaining relief  in the forum State, and the interests of other sovereigns in resolving the dispute." [Concurring Op., p.4]

Justice Sotomayor argues that these reasonableness considerations make jurisdiction improper in Daimler. [Concurring Op., pp.4-5] The majority, however, rejects the idea that a separate reasonableness analysis is justified in the context of general jurisdiction. In footnote 20 [pp.21-22], Justice Ginsburg writes that this reasonableness "check was to be essayed when specific jurisdiction is at issue… When a corporation is genuinely at home in the forum State, however, any second-step inquiry would be superfluous."  

[Cross-posted at Opinio Juris]

Recent Decisions, Supreme Court Cases | Permalink


Post a comment