United States: Daimler And Walden: The Supreme Court's Continued Trend On Limiting Personal Jurisdiction

Sarah Gogal Passeri and Sean P. Barry are Associates in our New York office

HIGHLIGHTS:

• The Supreme Court has issued two decisions that clarify the limitations of general and specific jurisdiction over a non-resident defendant.
• A defendant corporation will be subject to general jurisdiction in a state only if its contacts within the state are continuous and systematic as to render it "essentially at home there." In addition, the focus of the "minimal contacts" inquiry is "the relationship among the defendant, the forum, and the litigation," not the defendant's contacts with persons who reside in the forum.

Nearly three years after its landmark decisions in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011) and J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), the U.S. Supreme Court has issued two significant rulings that continue the trend toward limiting personal jurisdiction over a non-resident defendant.

In Daimler AG v. Bauman, No. 11-965 (2014), the Court narrowly construed the general jurisdiction requirements such that a non-resident defendant is present only if its own connections, as opposed to the connections of its in-state subsidiary, are so continuous and systematic as to render it "essentially at home" there. In Walden v. Fiore, No. 12-574 (2014), the Court held that a non-resident defendant is not subject to specific jurisdiction unless there is a sufficient relationship among the defendant, the forum and the litigation.

For airline industry defendants, the Court's rulings in these cases offer additional ammunition to challenge personal jurisdiction in forums unrelated to the incident and where defendants are "essentially [not] at home."

Daimler: General Jurisdiction

In Daimler, the plaintiffs, citizens of Argentina, sued DaimlerChrysler Aktiengesellschaft (Daimler), a German public stock company with no U.S. presence, in federal court in California. They alleged that Daimler's Argentine subsidiary, Mercedes-Benz Argentina (MB Argentina), collaborated with Argentinean state security forces to kidnap, detain, torture and kill them. The plaintiffs asserted jurisdiction over Daimler in California though Daimler's "agent," Mercedes-Benz USA, LLC (MBUSA), an indirect subsidiary of Daimler incorporated in Delaware with its principal place of business in New Jersey. MBUSA is Daimler's exclusive importer and distributor of Mercedes-Benz automobiles in the United States and has multiple California-based facilities.

The district court dismissed the action for lack of personal jurisdiction, but the U.S. Court of Appeals for the Ninth Circuit reversed, finding general jurisdiction over Daimler based on MBUSA's contacts in the forum. The Supreme Court unanimously¹ overruled the Ninth Circuit and reinforced its Goodyear holding that a defendant corporation will be subject to general jurisdiction in a state only if its contacts within the state are continuous and systematic as to render it "essentially at home there." Taking Goodyear one step further, the Court held that a foreign corporation may not be subjected to a court's general jurisdiction based on the contacts of its in-state subsidiary.² In so holding, the Justices rejected the "important-service test," which broadly extends general jurisdiction to any subsidiary or agent with important relations in the forum state. This test "stacks the deck" and would always yield a pro-jurisdiction answer. 

The Court clarified that general jurisdiction over a corporation will exist only where a corporation is incorporated, maintains its principal place of business, or has affiliations that are so continuous and systematic as to render it essentially at home in the forum state. Here, neither Daimler nor MBUSA had a principal place of business in California, nor were they incorporated in California. Additionally, the Court found MBUSA's physical locations in California, as well as its considerable sales in California, insufficient to render it "essentially at home" in California. Simply put, "a corporation that operates in many places can scarcely be deemed home in all of them."

Finally, the Supreme Court criticized the Ninth Circuit for paying too little attention to the risks of international comity. That other nations do not share the "uninhibited approach" to personal jurisdiction reinforced the Court's determination that subjecting Daimler to personal jurisdiction in California would offend the notions of "fair play and substantial justice" that due process demands.

Walden: Specific Jurisdiction

In Walden, the plaintiffs, who lived in Las Vegas, brought an action asserting that a Georgia-based drug enforcement agent violated their constitutional rights. The agent had seized cash from the plaintiffs while they were on a layover in Atlanta when returning from a gambling trip in Puerto Rico. Federal authorities ultimately returned the money to the plaintiffs.

The Nevada district court dismissed the suit for lack of jurisdiction over the defendant on the basis that the alleged harm to Nevada residents was insufficient to confer jurisdiction in Nevada. The Ninth Circuit reversed, finding jurisdiction appropriate because the defendant knew that the plaintiffs had significant connections to Nevada when he submitted his purportedly false affidavit in support of seizing the funds.

Overruling the Ninth Circuit, the Court underscored that the focus of the "minimal contacts" inquiry is "the relationship among the defendant, the forum, and the litigation," not the defendant's contacts with persons who reside in the forum. Much like the inquiry set forth in Daimler, the Supreme Court held that "the proper question is whether defendant's conduct connects him to the forum in a meaningful way." Under this standard, the Georgia-based defendant was not subject to personal jurisdiction in Nevada because none of the alleged conduct occurred there and none of his actions connected him to the state. The Court rejected the plaintiffs' "injury-based" argument that jurisdiction should be conferred based on the foreseeability of the defendant's action causing injury in the forum. The Court determined that "an injury is jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with the forum."

The Takeaway

These decisions, building on Goodyear and McIntyre, continue to establish a more limited framework in which courts will likely confer general or specific jurisdiction over non-resident defendants. They make clear that the jurisdictional inquiry is focused on the actual defendant's contacts – not those of the defendant's subsidiaries or the plaintiff – with the forum.

Notes

¹ Justice Ginsburg wrote for the eight-justice majority and Justice Sotomayor concurred in judgment.

² The court noted that it remains plausible that corporate affiliations or inter-corporate family relationships may create general jurisdiction over foreign defendants under an agency theory.

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