Federal Civil Procedure—Personal Jurisdiction—General Jurisdiction Over Foreign Corporations Based Upon Domestic Subsidiary Activity Within The Forum State

by Katherine Smalley

On March 26, 1976, a group of Argentinian military commanders staged a coup d’état to overthrow the corrupt and ineffective Argentinian government.  Establishing a Junta, the military government alongside newly appointed President Jorge Videla implemented a plan to eradicate dissenting voices within the Argentinian population by waging a “Dirty War.” Under the guise of legitimate government activity, this military regime executed a carefully orchestrated plan of kidnapping, detaining, and torturing Argentinian citizens suspected of dissent.  After years of this oppressive regime and increased public protest, in 1982 the Argentinian leadership formed a new caretaker Junta with appointed President Reynaldo Bignone to help establish a democracy.  Although the transition to a democratic Argentinian government was ultimately successful, the country continues to be haunted by the enduring memory of the Dirty War through the failed attempts at domestic prosecution including both statutory and executive pardons.

Due to the numerous executive pardons and generally ineffective attempts to bring the Dirty War participants to justice, Argentinian citizens have been unable to successfully bring all of the Dirty War participants to justice.  One such effort began in 2004, when twenty-two Argentinians residents (“plaintiffs”) brought a claim against German corporation DaimlerChrysler Aktiengesellschaft (“Daimler”) in Federal Court in the Northern District of California.  Asserting their claims under the Alien Tort Statute and the Torture Victim Protection Act of 1991, plaintiffs sought damages for wrongful death and intentional infliction of emotional distress caused by Daimler’s Argentinian subsidiary Mercedes-Benz Argentina’s (“MB Argentina”).  Their claim held parent corporation Daimler vicariously liable for MB Argentina’s collaboration in the kidnapping, detention, torture, and murder of its employees during the Dirty War.  All of the events giving rise to the suit occurred in Gonzalez-Catan, Argentina, the location of the MB Argentina plant.

The plaintiffs were required to show evidence that California had personal jurisdiction over Daimler to render a valid and enforceable judgment.  Personal jurisdiction was based upon the substantial California contacts of Daimler’s indirect subsidiary and exclusive United States importer and distributor, Mercedes-Benz USA (“MBUSA”), a Delaware corporation headquartered in New Jersey.  These substantial contacts included the presence of several offices and dealerships, in addition to the purchase of over 10% of all American new vehicle sales, which consisted of 2.4% of Daimler’s total sales.  The plaintiffs asserted that these contacts were sufficient to establish general personal jurisdiction over the defendant, and therefore, that Daimler may be sued on any and all claims, regardless where these claims arose.

The Federal District Court for the Northern District of California dismissed the claim, finding that Daimler itself did not have sufficient contacts with the state of California to impose general jurisdiction, and that plaintiffs failed to show that MBUSA acted as Daimler’s agent to successfully impute its contacts as those of Daimler itself.  On appeal, the Ninth Circuit initially affirmed the district court’s holding regarding the issues of agency; however the court replaced its opinion following Judge Reinhardt’s dissent and plaintiff’s petition for rehearing.  The Ninth Circuit subsequently denied defendant’s petition for rehearing and rehearing en banc, which prompted the United States Supreme Court to grant Daimler’s petition for certiorari to decide the issue of whether California had personal jurisdiction over foreign defendants whose claims arose out of events that occurred abroad pursuant to the Due. Process clause of the Fourteenth Amendment.  On certiorari to the United States Supreme Court, held, reversed. The Due Process Clause does not confer general jurisdiction over a foreign corporation based upon its subsidiary’s activities within the forum state when the imputed activity is not sufficiently substantial to render the defendant corporation essentially at home within the forum state. Daimler AG v. Bauman, 134 S. Ct. 746 (2014).

 

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