Supreme Court Limits U.S. State Court Jurisdiction over Foreign Companies

Foreign plaintiffs cannot bring suit in America against foreign defendants for events that took place entirely on foreign soil, according to a Jan. 14 unanimous judgment by the Supreme Court. 

If part of a global business empire committed illegal acts involving foreigners in a foreign country, but also owns a subsidiary in America, those foreigners cannot sue here for those illegal acts. It would violate the Due Process Clause of the Constitution’s Fourteenth Amendment for any state courts here in the U.S. to claim jurisdiction over the foreign company.

The case is Daimler AG v. Bauman. Twenty-two Argentinians sued Mercedes Benz, a German company, in California state court regarding alleged acts by one of the company’s subsidiary corporations, called Mercedes Benz Argentina. The subsidiary allegedly collaborated with foreign powers on the kidnapping, torture, and killing of the corporation’s workers in Argentina in the 1970s. Mercedes Benz also has an American subsidiary incorporated in Delaware which has extensive business activities in California but was not in any way involved with the foreign activities.

Daimler challenged California’s jurisdiction in federal court. The U.S. Court of Appeals for the Ninth Circuit held that California courts can claim jurisdiction over Daimler and decide the merits of the lawsuit. The Supreme Court voted 9-0 to reverse the Ninth Circuit, holding that it would violate due process for California courts to claim jurisdiction to decide such a case.

Justice Ruth Bader Ginsburg wrote the opinion for eight justices. She quoted the Supreme Court’s 1945 case on the reach of court jurisdiction, which held the Due Process Clause requires a defendant to have “minimum contacts” with the state in which a court wishes to claim jurisdiction, contacts of a nature that are sufficient for “traditional notions of fair play and substantial justice.”

On the basis of that watershed 1945 case, the Supreme Court in 2011 considered the difference between a court’s having “general jurisdiction” over anything pertaining to a defendant versus “specific jurisdiction” whereby a state court could entertain a lawsuit over certain conduct that relates to that local state. The Court held that state courts can only exercise “general jurisdiction” over an out-of-state company if 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 [local] state.”

In Daimler AG, the Court held that California’s courts were claiming general jurisdiction over this foreign corporation. The corporation involved, Daimler, “is not ‘at home’ in California, and cannot be sued there for injuries plaintiffs attribute to [Mercedes Benz] Argentina’s conduct in Argentina.”

Justice Sonia Sotomayor agreed that the Fourteenth Amendment does not allow California courts to claim jurisdiction over Daimler, but for different reasons, and so issued a separate opinion.

Ken Klukowski is senior legal analyst for Breitbart News and on faculty at Liberty University School of Law. Follow him on Twitter @kenklukowski.