How Will Supreme Court’s Daimler Decision Impact Business Litigation?

How Will Supreme Court’s Daimler Decision Impact Business Litigation?

Late last month, the U.S. Supreme Court released it much-anticipated decision in Daimler AG v. Bauman, which addressed when U.S. federal courts can exercise jurisdiction over corporations for conduct occurring exclusively overseas. The Court’s narrow view of general jurisdiction will likely make it harder to sue foreign and out-of-state businesses.

The case involved allegations of human rights abuses by residents of Argentina against Mercedes Benz Argentina, a subsidiary of Daimler AG. The plaintiffs contended that personal jurisdiction over Daimler rested on the California contacts of Mercedes-Benz USA, LLC (MBUSA), another Daimler subsidiary. MBUSA is a Delaware corporation with a principal place of business in New Jersey; it has several independent dealerships in California, among other states.

The Ninth Circuit Court of Appeals ruled that sales of the company’s Mercedes Benz vehicles in California and other commercial activity provided a sufficient basis for personal jurisdiction. However, the Supreme Court reversed the decision, holding that Daimler’s conduct in Argentina was outside of the reach of U.S. courts.

In reaching its decision, the Court focused on the distinction between specific and general jurisdiction, the latter of which is necessary when the lawsuit does not arise from the defendant’s conduct in the forum state. As explained by the Court, a corporation is subject to “general jurisdiction” only if its extensive contacts with the forum render it “at home” there.

With regard to the precise definition of “at home,” the justices suggested that general personal jurisdiction over a corporation may only exist in its place of incorporation and principal place of business. “A corporation that operates in many places can scarcely be deemed at home in all of them,” the justices concluded.

While the Court did acknowledge that an “exceptional case” may exist 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,” the justices set the bar fairly high for future suits.

For a more in-depth discussion of the Court’s decision, please visit the Scarinci Hollenbeck Constitutional Law Blog.

If you have any questions about this case or would like to discuss how it may impact your company’s litigation strategies, please contact me, Christine Vanek, or the Scarinci Hollenbeck attorney with whom you work.