U.S. Supreme Court Continues Trend of Narrowing Scope of General Jurisdiction Over Foreign Defendants

A trend is apparent only in hindsight. It is now reasonably clear that the United States Supreme Court has, over the last several years, restricted access to United States courts by litigants seeking to recover from foreign defendants for alleged wrongdoing outside of the United States. Thus, the Court has reinvigorated the presumption against the extraterritorial application of United States law (Morrison v. National Australia Bank); rejected the argument that foreign subsidiaries of a United States parent corporation would be amenable to suit based on general jurisdiction simply because a small percentage of their goods were continuously shipped to the forum state (Goodyear v. Brown); and held that the presumption against extraterritoriality applies to the Alien Tort Statute (Kiobel v. Royal Dutch Petroleum). Each decision had the effect of narrowing access to United States courts for claims against foreign corporations based upon conduct that took place outside of the United States.

Such access was further restricted on January 14, 2014 in Daimler AG v. Bauman, an important decision focused on the general jurisdiction standard. In Bauman, twenty-two Argentine residents sued Daimler AG in a California federal court under the ATS (and a related statute), seeking recovery for injuries allegedly suffered as a result of Daimler’s Argentinian subsidiary’s alleged collaboration with state security forces during Argentina’s 1976-83 “Dirty War.” The federal district court dismissed the lawsuit on jurisdictional grounds, but the Ninth Circuit Court of Appeals reversed, imputing to Daimler the California contacts of its corporate subsidiary and holding that Daimler was subject to general personal jurisdiction in California based upon the subsidiary’s continuous and systematic conduct there. The Supreme Court thus had to determine “whether a foreign corporation may be subjected to a court’s general jurisdiction based on the contacts of its in-state subsidiary.” Eight of the nine justices concluded that California lacked general jurisdiction over Daimler and therefore voted to reverse the Ninth Circuit, with the ninth justice concurring in the result but not the reasoning of the decision.

The Court assumed for purposes of the case that: (1) the subsidiary was “at home” in California and thus itself subject to general jurisdiction there, and (2) the subsidiary’s California contacts could be “imputed” to Daimler. Even under these assumptions, the Court rejected the claim that Daimler was subject to general personal jurisdiction in California, “for Daimler’s slim contacts with [California] hardly render it at home there.” The Court further explained: “Goodyear made clear that only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there. ‘For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.’” With respect to a corporation, the place of incorporation and principal place of business are the “paradig[m]… bases for general jurisdiction.” General jurisdiction cannot be based simply on the fact that a corporate subsidiary “engages in a substantial, continuous, and systematic course of business,” a formulation the Court found “unacceptably grasping.”

Although Bauman’s analysis and restrictive view of general personal jurisdiction, as a constitutional ruling, applies with equal force in suits involving domestic corporations sued in fora outside of where they are incorporated or where they have their principal place of business, it is evident that the focus of the Court was on restricting suits against foreign corporate defendants. Indeed, the Court noted that the Ninth Circuit “paid little heed to the risks to international comity its expansive view of general jurisdiction posed” and noted that other nations around the world “do not share the uninhibited approach to personal jurisdiction advanced by the Court of Appeals in this case.”

It will take several years before the extent of Bauman’s impact is known, but the case certainly provides a strong basis for foreign corporate defendants to challenge any plaintiff’s assertion of general jurisdiction over them.