Daimler AG v. Bauman & The “Too Big for General Jurisdiction” Phenomenon

BY GARRETT NEMEROFF — Recently, in Daimler AG v. Bauman, the U.S. Supreme Court held that DaimlerChrysler AG, a German corporation that manufactures Mercedes-Benz vehicles, could not be sued in California on the basis of its U.S. subsidiary’s (MBUSA) business activities in that state, when the claims asserted were for human rights violations that occurred in Argentina.[1]  The Court held that due process forbids a California court to exercise personal jurisdiction over Daimler based only on its corporate relationship with MBUSA and MBUSA’s California activities.

In truth, Daimler really was an international dispute.  The defendant was a German company whose Argentinian subsidiary allegedly caused injury to Argentinians in Argentina.  Yet, the plaintiffs sued in the U.S., arguing that a California court could exercise personal jurisdiction over Daimler because MBUSA distributed Daimler-manufactured cars to dealerships in California.  Their argument relied on the doctrine of general jurisdiction, which permits a plaintiff to sue a defendant for anything it does, anywhere in the world, so long as “the corporation is fairly regarded as at home” in the forum state.  Not surprisingly, the Court found the case relatively easy, and was unanimous in its judgment.  “A corporation that operates in many places,” the Court reasoned, “can scarcely be deemed at home in all of them.”

All of this raises the question of why the plaintiffs chose California in the first place?  Their claims had little to do with California or, for that matter, the United States.  The first reason, as Professor Donald Earl Childress III observes, is that the plaintiffs were probably not confident in their chances of recovery in Argentina “given that the alleged actions were taken in concert with the government of Argentina.”[2]  But more generally, the reason is that the U.S. court system offers foreign plaintiffs much more leverage in litigation than other jurisdictions, due mostly to the U.S.’s liberal discovery rules and favorable damages law.[3]

Nevertheless, in Daimler, the Supreme Court saw the practice of international forum shopping as a threat to international comity.  This attitude is also reflected by the Court’s recent decision, Kiobel v. Royal Dutch Petroleum, where it held that U.S. law is presumed not to apply to claims under the Alien Tort Statute when those claims arise outside of the country.[4]  But in an era where multinational commerce is as big as ever, is the Court granting an unjustified windfall to the now-familiar multinational corporation, which will continue to enjoy the benefits of U.S. commerce while largely avoiding the burdens of U.S. law?

As Justice Sotomayor pointed out in her concurring opinion, the Court apparently deems multinational corporations like Daimler “too big for general jurisdiction.”  “The ultimate effect of the majority’s approach,” Sotomayor observed, “will be to shift the risk of loss from multinational corporations to the individuals harmed by their actions.  Under the majority’s rule . . . [for example,] a parent whose child is maimed due to the negligence of a foreign hotel owned by a multinational conglomerate will be unable to hold the hotel to account in a single U.S. court, even if the hotel company has a massive presence in multiple States.”  Despite Sotomayor’s foresight, it seems that the time to rethink the meaning of a corporation’s “home” in today’s era of multinational commerce is not as close as one might think.  Maybe the fact that MBUSA’s California sales earned Daimler roughly $4.6 billion in 2004 is not as important as one might assume.[5]  Or maybe so.

Leave a Reply

Your email address will not be published. Required fields are marked *