Supreme Court Observations: Bauman v. DaimlerChrysler

dchildreGuest Commentary

by Donald Earl Childress III, Associate Professor of Law, Pepperdine University School of Law

On January 14, 2014, the Supreme Court handed down its decision in Bauman v. DaimlerChrysler. N1 Writing for all members of the Court except Justice Sotomayor (who concurred only in the judgment), Justice Ginsburg explained (following her opinion for a unanimous court in Goodyear) N2 that general jurisdiction is only available over a corporate defendant in the place of its incorporation, the place of its principal place of business, or, “in an exceptional case,” in another forum where it is “essentially at home.”  N3  Since none of these affiliations applied to the relationship between Daimler and California, the Court held that Daimler could not be sued in California for injuries allegedly caused by a subsidiary of Daimler in Argentina.  The Court sidestepped the precise issue it was asked to decide by Daimler in its certiorari petition (an issue written about in the Washington Legal Foundation’s On the Merits publication here):  whether a subsidiary’s contacts can be imputed to a parent corporation to establish general personal jurisdiction.  N4  If the Court did not decide the precise issue it was asked to decide, then what did it decide?

The Court’s Ruling

In Bauman, the Supreme Court held that Daimler was not subject to general jurisdiction in California for injuries allegedly caused by a subsidiary of Daimler in Argentina.  Before reaching this conclusion, the Court made several points designed perhaps to send not-so-subtle hints to lower courts. 

First, the Court reviewed in significant detail its precedents regarding specific and general jurisdiction.  While specific jurisdiction was never at issue in the case, the Court thought it helpful to make plain the differences between the two and to explain that “general jurisdiction has come to occupy a less dominant place in the contemporary scene.”  N5  More so, the Court tried to clear up terminological confusion regarding the words “continuous and systematic” contacts.  In short, the Court observed that the test for general jurisdiction was not whether a foreign corporation’s contacts with the forum state were “continuous and systematic,” rather the question is “whether that corporation’s ‘affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.’”  N6

Hint #1:  The Court meant what it said in Goodyear:  general jurisdiction should be limited, except in an exceptional case, to a corporation’s state of incorporation and principal place of business.  N7  The Court seems to be saying that lower courts should not take the “at home” language and use it to find general jurisdiction, on a “continuous and systematic theory,” as some courts had done following GoodyearN8

Second, the Court declined to directly address the issue of whether a subsidiary’s contacts with a forum state could be imputed to the parent to establish personal jurisdiction.  While noting that the courts of appeal have taken different approaches to the question, the Court did “not pass judgment on invocation of an agency theory in the context of general jurisdiction, for in no event can the appeals court’s analysis be sustained.”  N9  The Court also explained that while the Ninth Circuit imputed MBUSA’s contacts to Daimler, at no point was it ever shown that MBUSA was an alter ego of the company.  N10

Hint #2:  The Court appears to be calling into doubt whether a subsidiary’s contacts can ever be imputed to establish general jurisdiction as opposed to specific jurisdiction, but it leaves the door open to decide in another case the question.  At a minimum, the Court may be sending a message that to the extent imputation is available at all, it can only be done in the alter ego context.  This could have ramification for imputation questions concerning both general and specific jurisdiction.

So, what did the Court decide?  The Court sought to clear up any confusion remaining after Goodyear that a corporation is subject to general jurisdiction in its state of incorporation and its principal place of business, and, in an exceptional case, in another forum where it is essentially at home.

What the Court Left Open

The Court did not resolve several important issues that will be subject to further investigation by courts and scholars.

First, the Court declined to answer whether imputation of contacts is viable for establishing general personal jurisdiction.  As such, this theory still survives in several circuits.  This raises an interesting question:  would Daimler be subject to general jurisdiction in Delaware or New Jersey, where MBUSA would be subject to general jurisdiction as these are its places of incorporation and principal place of business?  Given that under the Court’s test MBUSA is at home in these fora, can its contacts be imputed to Daimler?  We do not know the answer to that question in light of the Court’s silence on imputation.  But, I suspect that the answer would be no in light of the Court’s strong language limiting general jurisdiction.

Second, the Court in reiterating a clear rule for assertions of general jurisdiction has given a strong signal that the “doing business” theory of general jurisdiction is of questionable vitality going forward.  N11

Third, the Court did not define the terms “exceptional circumstances.”  Of course, one wonders whether what is “exceptional” is in the eye of the district court.  This thus presents the possibility for creative lawyering and continued uses of general jurisdiction beyond what the Court appears to intend.

Implications

At bottom, the Court’s decision will be welcomed by many corporate defendants seeking to resist expansive theories of general jurisdiction.  With that said, enough issues remain to encourage corporate counsel to vigorously resist assertions of jurisdiction beyond what the Court has established especially those utilizing a “doing business” theory of general jurisdiction.

Notes

1. 2014 WL 113486 (2014).

2. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).

3. Bauman, 2014 WL at *12 n.20.

4. The question presented by Daimler’s certiorari petition was “whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State.”  Pet. for Cert. i.

5. Bauman, 2014 WL at *9 (footnote omitted).

6. Id. at *11 (quoting Goodyear).

7. Id. at *11 nn.17 & 18.

8. See, e.g., J.B. ex rel. Benjamin v. Abbott Labs. 2013 WL 452807 (N.D. Ill. 2013); Ashbury Intern. Group v. Cadex Defence, Inc., 2012 WL 4325183 (W.D. Va. 2012).

9. Id. at *10.

10. Id.

11. Id. at n. 18.

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