Heyl Royster

Personal Jurisdiction Has Some Teeth

february 26, 2015

By: Tyler J. Pratt

In 2014, the U.S. Supreme Court severely restricted the scope of personal jurisdiction upon a foreign corporation in Daimler AG v. Bauman, 134 S. Ct. 746 (2014). The decision in Daimler followed the Supreme Court's 2011 decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011). In Goodyear, the Supreme Court rejected the "stream-of-commerce theory." Specifically, the Supreme Court found that the stream-of-commerce analysis was far too encompassing when analyzing personal jurisdiction, given it would render any substantial manufacturer or seller of goods open to suit wherever its products are distributed.

In 2014, the Supreme Court in Daimler was asked to consider whether general jurisdiction existed in California based on the presence of one of Daimler's subsidiary corporations. Plaintiff's cause of action arose out of disputes in Daimler's subsidiary in Argentina. Daimler and its U.S. subsidiary were not incorporated and did not have their principal places of business in California. The facts further established the U.S. subsidiary distributed Daimler manufactured vehicles to independent dealerships throughout the United States, including California. Over 10% of its U.S. sales occurred in California. California sales also accounted for 2.4% of Daimler's worldwide sales. Despite this volume, the Court refused to find Daimler subject to California's general jurisdiction, noting sales alone were insufficient to establish Daimler was "at home" in California.

The Supreme Court in Daimler clarified that the proper inquiry does not involve whether the forum corporation contacts are continuous and systematic. Instead, the Supreme Court found that the corporation's affiliations with the state must be continuous and systematic as to render it essentially at home in the forum state. Essentially, the Supreme Court explained that, absent exceptional circumstances, a corporation is at home in the forum where it is incorporated and where it has its principal place of business. As stated in Monkton Ins. Servs., Ltd. v. Ritter, 768 F. 3d 429, 432 (5th Cir. 2014), "[i]t is . . . incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business," in light of Goodyear and Daimler.

Excluding those cases where jurisdiction is premised upon specific jurisdiction, i.e., your involvement in an accident in the chosen forum, the Daimler decision provides great strength to an argument that you are not subject to personal jurisdiction in an unfriendly forum. The Supreme Court did note that a corporation's operations in a forum other than its place of incorporation or principal place of business may be so substantial as to render that corporation at home in that state. Nevertheless, the decision provides a great opportunity to challenge personal jurisdiction when confronted with a lawsuit filed in a very unfriendly forum.

© 2024 Heyl Royster. All Rights Reserved.