Bauman v. DaimlerChrysler Corp.

Citations: 676 F.3d 774; 2011 WL 5402020; 2011 U.S. App. LEXIS 22612Docket: 07-15386

Court: Court of Appeals for the Ninth Circuit; November 9, 2011; Federal Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The United States Court of Appeals for the Ninth Circuit unanimously denied a petition for rehearing and rehearing en banc in a case involving plaintiffs from Argentina who sued DaimlerChrysler AG, alleging human rights violations by its subsidiary in Argentina during the 'Dirty War.' The court initially affirmed the dismissal of the suit due to lack of personal jurisdiction over Daimler, but later reversed this decision, finding that Daimler was subject to general jurisdiction in California based on the activities of its U.S. subsidiary, Mercedes-Benz USA. This ruling was met with dissent from several judges who argued that it extends personal jurisdiction excessively, undermining due process principles by asserting jurisdiction over a foreign corporation based solely on the existence of a separate U.S. subsidiary. The dissent emphasized that such a broad interpretation of jurisdiction conflicts with Supreme Court precedents and the standards of other circuit courts, noting that Daimler lacked sufficient contacts with California itself. The dissenters expressed concern that the panel's decision disregards constitutional boundaries and the fundamental rights of defendants to have clear assurances regarding where they may be held liable.

For a foreign corporation to be subject to general jurisdiction, its contacts with the forum state must be so continuous and systematic that it is essentially "at home" there, as established by the Supreme Court in *Goodyear Dunlop Tires Operations, S.A. v. Brown*. The current court's decision undermines this standard by creating a new test for general personal jurisdiction that lacks minimum assurance regarding liability for Daimler. There are two established tests for attributing a subsidiary's contacts to a parent corporation: the alter ego test and the agency test. The alter ego test, which focuses on the unity of interest and potential for fraud or injustice, is not relevant here since Daimler does not control Mercedes-Benz USA to the extent that it becomes merely its instrumentality.

However, the court finds general jurisdiction over Daimler by redefining the agency test, which now requires a subsidiary's services to be crucial enough to be performed by the parent if the subsidiary did not exist, and that the parent has substantial control over the subsidiary's activities. This redefinition significantly expands the scope of personal jurisdiction, neglecting the fundamental fairness principles inherent in Supreme Court due process jurisprudence. The panel's approach risks making many foreign corporations subject to general jurisdiction inappropriately, as it blurs the lines of what constitutes sufficient control and connection.

Additionally, this interpretation challenges the constitutional limits established by the Due Process Clause of the Fourteenth Amendment, which governs a state's authority to exercise jurisdiction over defendants. The court appears to disregard the principle of corporate separateness, a cornerstone of American corporate law, which necessitates that jurisdiction must be established individually for corporations and their shareholders.

Permitting a subsidiary's activities to establish personal jurisdiction over a separate parent corporation violates due process principles, as affirmed in Cent. States, Se. Sw. Areas Pension Fund v. Reimer Express World Corp. The parent company is not subject to general jurisdiction in New Jersey, as it is not "at home" there. The decision perpetuates a circuit split, with at least six circuits rejecting the agency test for jurisdiction. Personal jurisdiction based on a subsidiary's actions is only valid if the parent corporation dominates the subsidiary to the extent that they are not truly distinct entities. The relationship between parent and subsidiary must show domination rather than mere ownership to justify jurisdiction. This view aligns with historical Supreme Court rulings, such as Cannon Mfg. Co. v. Cudahy Packing Co., which maintain that mere ownership does not suffice for jurisdiction over a foreign corporation. The agency test is seen as too flexible and unpredictable, which undermines due process and the ability of corporations to navigate legal expectations. Other circuits employ varying tests that resemble the alter ego doctrine, emphasizing the need for clear, consistent standards for establishing personal jurisdiction. For plaintiffs to succeed in asserting general jurisdiction based on a subsidiary's activities, they must demonstrate that the subsidiary's existence is merely a formality and that it acts as the parent’s agent.

The exercise of jurisdiction deemed proper in this case may be inappropriate in other circuits, highlighting the need for corporations to have clarity on the legal implications of their conduct. A uniform jurisdictional rule is essential, particularly for the Federal Government's regulation of foreign commercial relations. The panel's decision could adversely affect foreign policy and international relations, as many European countries discourage jurisdiction by imputation. Some nations have retaliatory jurisdictional laws, allowing their courts to assert jurisdiction over foreign entities based on their domestic jurisdictional claims. For instance, an Italian court could potentially exercise jurisdiction over a U.S. parent company due to its subsidiary's activities in Italy. The expansion of general personal jurisdiction risks harming U.S. foreign trade and diplomatic interests, a concern previously acknowledged by the Supreme Court. The panel's dismissal of these significant issues is troubling. The dissenting opinion argues that Daimler does not have sufficient ties to California to justify jurisdiction based solely on its Argentinian subsidiary's actions in Argentina. The decision signifies an unwarranted broadening of general personal jurisdiction, threatening economic and diplomatic stability, warranting a call for en banc rehearing.