US Supreme Court Dramatically Narrows Grounds for General Personal Jurisdiction

In January 2014, the US Supreme Court decided Daimler AG v. Bauman, 571 U.S. ___, 134 S. Ct. 746 (2014), a decision that could be of substantial importance to any non-US bank or non-US corporation that has US branches or offices in the United States, as well as any US bank or corporation that has branches or offices outside of its principal place of business or place of incorporation (its "home state"). Under Daimler, a company typically will be subject to general personal jurisdiction only in the forum where it is incorporated or where it has its principal place of business. In other words, Daimler adopts an approach similar to that of the European Union, where "a corporation generally may be sued in the nation in which it is 'domiciled,' a term defined to refer only to location of the corporation's 'statutory seat,' 'central administration,' or 'principal place of business,'" whereas there is no EU jurisdiction to sue a branch outside of the corporation's domicile unless the "dispute arise[s] out of the operations of [the] branch."1 Daimler thus may provide significant relief not only to non-US banks with US branches that, pre-Daimler, would have been subject US jurisdiction in a wide variety of contexts, but also to other non- US and even US corporations operating outside of their home states.

Personal Jurisdiction

Pursuant to the US Constitution, a court may assert personal jurisdiction against an out-offorum defendant in one of two circumstances: where a defendant is "essentially at home in the forum state" (i.e., "general jurisdiction") or where the lawsuit "arises out of or relates to the defendant's contacts with the forum" (i.e., "specific jurisdiction"). Historically, the general jurisdiction standard was satisfied whenever a non-US bank (or other non-US corporation or out-of-state US corporation) maintained a branch or office in the forum where it was named a defendant in a lawsuit. Daimler, however, significantly restricts the circumstances that provide a basis for the exercise of general jurisdiction.

The Daimler Decision

The plaintiffs brought suit in California against Daimler, a German parent company, seeking to recover for injury suffered as an alleged consequence of activities undertaken by a Daimler subsidiary in Argentina during that country's "Dirty War." The suit could go forward only if general jurisdiction over Daimler existed in California. Because "Daimler's own contacts with California were, by themselves, too sporadic to justify the exercise of general jurisdiction," the question was whether the California contacts of Daimler's US subsidiary, MBUSA, could be attributed to the parent and, if so, whether those contacts were sufficient to establish general jurisdiction. The Ninth Circuit Court of Appeals held the assertion of jurisdiction over Daimler proper, concluding that MBUSA was subject to general jurisdiction in California and that MBUSA's California contacts could be attributed to Daimler on an agency theory because MBUSA "'performs services that are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services.'"2

In its review of the Ninth Circuit's decision, although the Supreme Court left open the question whether an agency theory ever could support general jurisdiction, it flatly rejected "[t]he Ninth Circuit's agency theory [that] ... appears to subject foreign corporations to general jurisdiction whenever they have an instate subsidiary or affiliate, an outcome that would sweep beyond even the 'sprawling view of general jurisdiction' we rejected in Goodyear [Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, (2011)]."

The Court then went on to discuss a broader question. "Even if we were to assume that MBUSA's contacts are imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California, for Daimler's slim contacts with the State hardly render it at home there."3 In reaching this conclusion, the Court made several observations.

First, the Court forcefully reiterated its recent holding in Goodyear that general jurisdiction against a foreign corporation is permissible "only when the corporation's affiliations with the State in which suit is brought are so constant and pervasive 'as to render [it] essentially at home in the forum State.'"4 The Court continued: "With respect to a corporation, the place of incorporation and principal place of business are 'paradig[m] ... bases for general jurisdiction.' ... Those affiliations have the virtue of being unique—that is, each ordinarily indicates only one place—as well as easily ascertainable."5

Although the Court purported not to "foreclose the possibility that in an exceptional case ... a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial or of such a nature as to render the corporation at home in that state,"6...