Avoiding Carts before Horses in Daimler AG

JURIST Guest Columnist Stan Cox of New England Law | Boston says that the US Supreme Court should use great caution in its application of general personal jurisdiction doctrine to the facts of the Daimler AG case ...
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If the justices are not careful in their handling of the case, Daimler AG could prove to be another personal jurisdiction disaster for the Supreme Court. On any reasonable view of what due process should permit, there should not be personal jurisdiction over Daimler (a German company) in California for a suit by Argentinian plaintiffs based on activities of an Argentinian Daimler subsidiary for conduct that occurred in Argentina many years ago. The Ninth Circuit was wrong to hold otherwise. But because the Supreme Court has not developed a principled rationale for general personal jurisdiction in prior case law, and because of the complicated posture of the Daimler case, there is real possibility that, if the Court reaches the merits of the personal jurisdiction issue, the justices might speak broadly about general personal jurisdiction when, frankly, they do not yet seem to be in a position to know what they should say.

General personal jurisdiction is all-purpose personal jurisdiction. Where you have it over a defendant, you can sue that defendant in that forum for anything the defendant has done anywhere. In prior cases, the Supreme Court has not laid down anything like a clear test for how much connection with a forum is required for general jurisdiction. Nearly thirty years ago, in the Helicol case, the Court endorsed the requirement that a company must have "continuous and systematic general business contacts" with a forum before the company can be subject to general jurisdiction. More recently, in Goodyear, the Court reaffirmed that language, and added the gloss that a defendant must be capable of being "fairly regarded as at home" before general jurisdiction will be appropriate. In both cases, the Court pointed to the facts of a prior case, Perkins, as a paradigmatic situation where general jurisdiction was satisfied. But in no case has the Court said that general jurisdiction must be restricted to situations that rise to the level of Perkins, where a corporation is doing all the business it can do at the time in that forum.

During Daimler oral argument October 15, several justices seemed either to be leaning towards or assuming that the test for general jurisdiction should restrict it to the places where a business is incorporated or has its principal place of business. I agree that general jurisdiction should be limited to the place where a company is most at home, presumptively only its states of incorporation and principal place of business. But the problem for the justices is they have no principled reason, based in prior case law, for adopting, as a matter of constitutional law, such a restrictive test for general jurisdiction. Such a test, would, as Justice Alito notes, be a "nice clear rule." But personal jurisdiction is not a matter of statutory interpretation, where the Court can fill in whatever ambiguity Congress hands it and then let Congress change the rule to something else if displeased with the Court's line drawing. That was appropriate in the Hertz case of 2010, construed the principal place of business in 28 USC 1332 to be its nerve center headquarters. A constitutional restriction on state ability to hear cases needs something more than the Court's desire for a clear rule and the certainty that nothing unfair could happen if the line were drawn so restrictively. If the Court goes such ipse dixit route, Justice Black's worst fears about justices' subjective judgments driving due process personal jurisdiction doctrine, expressed at the very beginning of the Court's passage down the minimum contacts road in International Shoe, would be realized.

The Court would not be inscribing its "because-we-say-so" definitions upon a clean slate, either. The Court has hardly always assumed that general jurisdiction should be limited to place of incorporation and principal place of business. Nor are these contrary prior Court assumptions only in ancient pre-Shoe opinions. For example, in the Allstate case, in 1981, every member of the Court assumed that defendant Allstate was subject to personal jurisdiction in Minnesota. For some of the justices this assumption was necessary to their conclusion that there would be no unfair surprise to Allstate in applying Minnesota law to insurance coverage issues for a policy issued elsewhere that was triggered by an accident that occurred elsewhere. For the other justices, the fact that Allstate was subject to personal jurisdiction in Minnesota was irrelevant to the choice of law issue before the Court. But all the justices assumed, not arguendo but as a background factual matter, that the amount of business Allstate did in Minnesota subjected it to personal jurisdiction there, without regard to what the underlying lawsuit was about. Since Minnesota was neither Allstate's principal place of business nor state of incorporation, Allstate would be similarly subject to personal jurisdiction everywhere else it had offices and did business.

To move to the constitutional conclusion that general jurisdiction must now instead be limited to where a corporation is most present requires underlying rationales rather than evolving assumptions. In its two general jurisdiction cases, however, the Court provided no rationales for the general personal jurisdiction doctrine, only data points along a continuum. We know that general jurisdiction exists when a corporation is doing all the business it can do in the forum (Perkins). We know it doesn't exist if the corporation is making purchases in the forum (Helicol), nor if some of its products are distributed into the forum (Goodyear). Between those "yes" and "no" data points is the huge land of who knows. For example, what if there is a physical office? Or full-time employees? What if the company directly sells a majority or very substantial portion of its products in the forum? Are these activities sufficiently "continuous and systematic" such that the corporation can fairly be considered "at home" where they occur?

We do not know exactly what the restrictions on general jurisdiction should look like, because the Court has never explained why, as a matter of jurisprudence, instead of merely counting contacts, the doctrine should exist. My own belief (the subject of an in-process law review article), not shared by most (any?) other academics, is that general jurisdiction should be limited to the place where a company is most present, because only that sovereign can legitimately impose its own laws on that company's conduct wherever that conduct occurred. Others may believe general jurisdiction is justified by a kind of necessity principle, the need for one sure place you are able to sue. Perhaps the doctrine is supported by ideas of all-purpose submission being required before there can be all-purpose litigation exposure. Perhaps due process fairness requires not exposing a company to unrelated litigation liability unless one is sure there would be absolutely no physical inconvenience to the defendant by such suits. I will not clutter this posting with the many possibilities. The point is that the Court should be wrestling with the "why" arguments for a restrictive approach to general jurisdiction, but only in a case that presents the issues squarely, where those issues become the focus of the argument and briefing to the Court.

The "why" of general jurisdiction has not been the focus of the briefs or arguments in Daimler, partly because the parties and ninth circuit assumed (incorrectly) that general jurisdiction existed over the Daimler subsidiary doing substantial business in California. The issues in Daimler became one step additionally removed from those personal jurisdiction issues, since jurisdiction was disputed only over the parent, not the sub. The focus of briefs and arguments in Daimler, and also the issue granted cert on, was attribution. Would it violate due process to attribute the contacts of the German parent's US seller, MBUSA, to Daimler, such that Daimler is subject to general jurisdiction, when the parent concedes that the subsidiary is subject to general jurisdiction in that forum.

The Court could reverse the Ninth Circuit for using an attribution test too easily satisfied, and which failed to give meaningful consideration to corporate separateness. The Court's pronouncements would then become constitutionally required in attribution situations. Such a ruling could be confined merely to chiding the Ninth Circuit for not taking into account the right factors. The instruction on remand would be to take the proper factors into account and then decide, for contacts that could be attributed, whether these contacts satisfy general jurisdiction requirements. The Court would not have to specify in any more detail what those general jurisdiction requirements are.

A better solution would be simply to vacate and remand for reconsideration in light of Goodyear's requirement that a corporation must be found "at home" in the forum. Some additional brief comments could be added that it is never automatic for a parent to be found "at home" just because a subsidiary might be conceded to be at home in the forum. The Court could emphasize that the individual contacts of the parent, even if through the subsidiary, have to satisfy the "at home" test, without explaining exactly what that test requires.

But if the Court instead finds itself unable to resist the temptation to describe in more detail than it so far has what are the dimensions of general personal jurisdiction, watch out! Putting the cart of general jurisdiction description prematurely in front of the horses of harder cases and strongly briefed rationales risks producing yet more ruts on the minimum contacts highway.

Professor Stan Cox is Professor of Law at New England Law | Boston. He has written numerous articles about the relationship between personal jurisdiction and choice of law, and is to be co-author for a new edition of the two-volume treatise, Jurisdiction in Civil Actions.

Suggested Citation: Stan Cox, Avoiding Carts before Horses in Daimler AG, JURIST - Forum, Nov. 1, 2013, http://jurist.org/forum/2013/11/stan-cox-personal-jurisdiction.php


This article was prepared for publication by Dan DeRight, an associate editor for JURIST's academic commentary service. Please direct any questions or comments to him at academiccommentary@jurist.org

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