Guest Post: SCOTUS Oral Argument in Daimler v. Bauman

[Adam N. Steinman is Professor of Law and Michael J. Zimmer Fellow at Seton Hall Law]

Cross-posted at Civil Procedure & Federal Courts Blog

This week the Supreme Court heard oral argument in Daimler AG v. Bauman (covered earlier here and here). Daimler resembles last Term’s Kiobel case, in that it involves claims against a foreign defendant (Daimler) for human rights and other violations committed abroad (in Argentina, during the “dirty war” of the 1970s and 1980s) under the Alien Tort Statute (ATS). But the question for which the Court granted certiorari in Daimler involves personal jurisdiction and is not limited to ATS cases: “whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State.”

During the argument, plaintiffs’ counsel acknowledged that their ATS claims faced an “uphill struggle” in light of Kiobel, but they are also pursuing state law and foreign law claims – for which personal jurisdiction would remain a live issue. Given the question presented, the more significant SCOTUS precursor may be the 2011 Goodyear decision, not Kiobel. Writing for a unanimous Court, Justice Ginsburg wrote in Goodyear that general jurisdiction over corporations is proper “when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” She cited (1) a corporation’s principal place of business and (2) its state or country of incorporation as “paradigms” for general jurisdiction; but it remains unclear what else could render a corporation “essentially at home” in a particular forum. In particular, Goodyear acknowledged – but did not address – the argument that distinct corporate entities might be treated as a “single enterprise” for jurisdictional purposes. In Daimler, the Ninth Circuit found that California had general jurisdiction over Daimler based on the activities its American subsidiary, Mercedes Benz USA (MBUSA).

The most common reaction to this week’s oral argument has been that the Justices were quite skeptical of the idea that Daimler was subject to general jurisdiction in California. That may be so, but several interesting issues came up during the argument, and there are still a number of different ways the Court could ultimately dispose of the case (some of them quite narrow).

One topic of discussion was whether state law or federal law governed the extent to which MBUSA’s contacts could be attributed to Daimler. Under Federal Rule of Civil Procedure 4(k)(1)(A) –the basis for personal jurisdiction in this case – a California federal district court can exercise personal jurisdiction if a California state court could exercise personal jurisdiction. Thus, jurisdictional restrictions in state long-arm statutes can confine federal courts as well. California’s long-arm statute, however, extends as far as the 14th Amendment allows. It would seem, then, that personal jurisdiction ultimately hinges on the federal question of whether, on these facts, the 14th Amendment permits a state court to assert general jurisdiction over a foreign parent based on the activities of its subsidiary. Questions by Justices Sotomayor and Alito suggested that this was indeed a federal issue. Justices Scalia and Breyer, however, inquired repeatedly about state law. One line of questioning by Justice Breyer suggested the view that, just as state corporations law defines when a parent company can be liable for a subsidiary’s conduct, so too would state corporations law define when a parent can be subject to jurisdiction based on a subsidiary’s activities.

Another significant issue in Daimler is whether Daimler waived or forfeited certain arguments against personal jurisdiction. The plaintiffs argue that Daimler conceded that if MBUSA’s contacts are properly considered for jurisdictional purposes, then general jurisdiction would be proper; therefore, the crucial question was simply whether and when the subsidiary’s contacts are relevant. Justice Ginsburg emphasized this possible concession during the argument, but Justice Kagan was less troubled by it (“[E]ven if you waived that point, if I understand it correctly, you did not waive the point that even with all attribution in the world, there still is no general jurisdiction over Daimler. In other words, you could attribute all MBUSA’s contacts and you still would not have general jurisdiction over Daimler.”).

As to the “merits” of the jurisdictional argument, there were some noteworthy moments – especially toward the end of the plaintiffs’ argument time. Justice Alito asked: “why shouldn’t the rule be that unless a corporation is incorporated in the jurisdiction or has its principal place of business in the jurisdiction, the — the acts of the subsidiary are not attributable unless it’s an alter ego.” One comment by Justice Ginsburg suggested the possibility that principal place of business and place of incorporation are the only places where a corporation is subject to general jurisdiction; she observed: “There would hardly be room for a decision next to Goodyear that says, oh, for general jurisdiction purposes it’s enough that you have some subsidiary operating in the State. The whole idea of Goodyear was to say there is one place you can always sue a corporation, one or two, place of incorporation, a principal place of business.”

It’s hard to find much positive news for the plaintiffs in the oral argument transcript, but one came during the U.S. government’s portion of the argument (the S-G filed a brief supporting Daimler). In arguing against jurisdiction over Daimler, the government’s counsel asserted that MBUSA “acts independently” of Daimler. Justice Sotomayor responded: “It seems an odd thing to say given the page and a half that the lower court went through on the various ways in which Germany controls this subsidiary. It appoints all its officers. It approves all its operating procedures. It approves all of the people it hires and fires. It seems like there isn’t much left for what….” As further proof that it was not the plaintiffs’ day, Justice Sotomayor was then interrupted by Chief Justice Roberts.

While it appears unlikely that the Court will endorse the Ninth Circuit’s conclusion that general personal jurisdiction existed over Daimler, it is possible that the Court’s opinion will be a narrow one. Justice Sotomayor asked during Daimler’s rebuttal argument: “Given that so many issues have not been adequately briefed, conceded when they are obviously fallacious and unsupportable, why don’t we just say simply exercise of jurisdiction is unreasonable in this case?” Justice Breyer stated that the Court could merely remand the case for reconsideration in light of Goodyear and Kiobel. If such a remand occurs, federal subject-matter jurisdiction might also be a concern: Justice Ginsburg suggested at one point that – assuming the ATS claims are dismissed based on Kiobel –it would be “arbitrary” to exercise supplemental jurisdiction over the remaining state law and foreign law claims.

P.S.  The Daimler argument also featured an interesting discussion about when specific jurisdiction would be proper over a foreign company, with Justice Ginsburg posing this hypothetical to Daimler’s counsel: “[S]uppose we had a case of an accident on a California highway injuring California people and they sued charging that the Mercedes Benz was defectively manufactured. Would there be jurisdiction over both the parent and the sub in that situation?” The question prompted an exchange about the Court’s inconclusive 2011 decision in J. McIntyre Machinery v. Nicastro, in which a fractured Court rejected jurisdiction over a British manufacturer whose metal-shearing machine injured a plaintiff in New Jersey. Justices Ginsburg and Kennedy figured prominently during this part of the argument, as they did in the McIntyre decision itself (Kennedy authored the plurality and Ginsburg the dissent).