Midway through its October 2013 term, on January 14, 2014, the Supreme Court of the United States decided a case that will make its way into every civil procedure casebook, Daimler AG v. Bauman. The plaintiffs, residents and citizens of Argentina and Chile without any connection to the United States, initiated a federal court lawsuit in California against Daimler AG, a German company, seeking relief for the allegedly tortious activities of Mercedes-Benz Argentina, a subsidiary corporation of Daimler AG. The plaintiffs alleged that the subsidiary had collaborated with Argentine security forces during that country’s 1976–1983 “Dirty War” to detain, kidnap, torture, and kill Argentine nationals employed by or related to employees of Mercedes-Benz Argentina—injuries that occurred entirely within Argentina. Writing for eight members of the Court, Justice Ruth Bader Ginsberg concluded that the plaintiffs’ lawsuit could not go forward because the trial court could not exercise personal jurisdiction over the defendant Daimler AG.
The Background to Daimler
The term “jurisdiction” generally has two meanings. Subject-matter jurisdiction refers to a tribunal’s authority to resolve a dispute. That was not at issue in the Daimler case. Personal jurisdiction, the authority of a court to enter judgment against a specific individual or entity, was at issue.
Personal jurisdiction comes in two varieties. Specific jurisdiction encompasses the circumstances in which a party seeks to obtain judicial relief for a specific act or series of acts that the defendant is alleged to have taken in a particular state. General jurisdiction describes the scenario in which a corporation can be sued for any harm it may have caused anywhere in the world. General jurisdiction generally is limited to states in which a person or corporation resides, which, in the case of a corporation, is where it is incorporated or headquartered. At issue in the Daimler case was the breadth of the general jurisdiction doctrine.
The Supreme Court’s Decision in Daimler
As Justice Ginsberg explained, the Due Process Clause of the Fourteenth Amendment limits a court’s ability to exercise personal jurisdiction over the parties to a civil lawsuit. That is, the clause limits a plaintiff’s ability to demand that a particular party defend himself, herself, or itself in a specific federal or state court against the claim that the defendant has violated some private or public right enjoyed by the plaintiff.
Originally, the principal restriction was geographical because it rested on the notion that the trial court needed to be able to exercise “physical power” over a defendant. In 1878, in Pennoyer v. Neff, the Court ruled that a court may exercise jurisdiction over a defendant only within the boundaries of the state in which the court found itself. Put another way, a court may not exercise jurisdiction extraterritorially—that is, over anyone in a different state—because doing so would interfere with the coequal sovereignty of another state.
That rule was a reasonable one for a primarily agrarian economy, one in which the majority of business was conducted on a local or intrastate basis. Over time, however, the emergence of a national economy and the birth of nationwide transportation and communications capabilities meant that persons and firms could adversely affect other parties at a great distance.
Recognizing that problem, beginning in 1945, the Supreme Court in International Shoe Co. v. Washington expanded the permissible personal jurisdictional bases for hauling a defendant into court. Today, a plaintiff may sue a corporation not only in its “home” state—that is, where the business is incorporated or has its principal place of business—but also in a state where it directly conducts business and that business gave rise to the breach of contract, tort, or public law violation at issue in the case.
In Daimler AG, the Court concluded that neither basis justified the plaintiffs’ attempt to sue Daimler AG in California. The home for Daimler AG was Germany, not California, and none of the allegedly tortious acts could be attributed to Daimler AG rather than to its subsidiary. To be sure, Mercedes-Benz Argentina was the agent for Daimler AG in that nation, but that fact alone was insufficient to render Daimler AG subject to suit in California, because all of the allegedly tortious acts took place in Argentina. The California courts therefore could not exercise personal jurisdiction over Daimler AG without subjecting a company to suit in whatever forum a related corporate entity could be served with process. That rule, the Court concluded, would stretch the general jurisdiction doctrine too far.
The Significance of the Supreme Court’s Decision in Daimler
The Daimler AG case is both interesting and important. It is interesting because of what it signals. The ruling effectively forecloses plaintiffs from suing nondomestic corporations for wrongs that they allegedly committed beyond U.S. shores that did not adversely affect the plaintiff in this nation. Over the course of the past few years, foreign and domestic plaintiffs have sought to use the courts of the United States as an erstwhile “World Human Rights Court” in which anyone could sue anyone else for alleged human rights abuses under one or more of the federal statutes that invoke or make reference to international norms. The Supreme Court has been hostile to those efforts, and the Daimler AG decision may be the final nail in their coffin.
The Daimler AG case is important for two reasons. First, the Court apparently has made up its mind on this subject. The Court unanimously turned aside the plaintiffs’ claims, even though there was some slight disagreement over the rationale. Second, the Court rested its decision on the Due Process Clause. In its other recent decisions involving foreign plaintiffs, the Court bottomed its ruling on an interpretation of the particular statute at issue. The result was to foreclose relief to a particular set of plaintiffs unless and until Congress amended the act in order to broaden its reach. But the Daimler AG case did not involve an issue of statutory interpretation, so Congress cannot “remedy” any error that it might perceive in the Court’s decision through new legislation.
Congress is no less bound than the states by constitutional restrictions on personal jurisdiction. It also is highly unlikely that Congress could resort to the treaty process to evade due process restrictions in cases like Daimler AG because the Fifth Amendment limits the Senate’s Article II treaty-approval power just as much as it limits Congress’s Article I regulatory authority. The Daimler AG case therefore stands as a new and important limitation on the authority of the states and the federal government to volunteer our courts to serve as the “World Court for Litigation.”—Paul J. Larkin Jr., is Senior Legal Research Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.