Bauman v. Daimlerchrysler Corp.
644 F.3d 909 (2011)
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Rule of Law:
A court can exercise general personal jurisdiction over a foreign parent corporation when a U.S. subsidiary, acting as its agent, has continuous and systematic contacts with the forum state. An agency relationship for jurisdictional purposes is established if the subsidiary performs services so important that the parent would otherwise perform them itself, and the parent has the right to control the subsidiary's activities.
Facts:
- Plaintiffs were workers or relatives of workers at a Mercedes-Benz Argentina (MBA) plant, a wholly-owned subsidiary of the German corporation DaimlerChrysler Aktiengesellschaft (DCAG).
- During Argentina's 'Dirty War' in the 1970s, plaintiffs allege that MBA collaborated with state security forces to kidnap, torture, and kill certain MBA plant workers deemed 'union agitators'.
- Mercedes-Benz USA (MBUSA), another wholly-owned subsidiary of DCAG, is the exclusive distributor of Mercedes-Benz vehicles in the United States.
- MBUSA has extensive operations in California, including a regional office, a vehicle preparation center, and a classic center, and its sales in California accounted for 2.4% of DCAG's total worldwide sales.
- A 'General Distributor Agreement' governs the relationship between DCAG and MBUSA, giving DCAG the right to control nearly all aspects of MBUSA’s operations, including sales volume, marketing strategies, personnel appointments, pricing, and business systems.
- The Chairman of DCAG, Dieter Zetsche, also served as the Chairman of MBUSA.
Procedural Posture:
- Twenty-two Argentinian residents (Plaintiffs) filed a lawsuit against DaimlerChrysler Aktiengesellschaft (DCAG) in the U.S. District Court for the Northern District of California.
- DCAG filed a motion to dismiss the lawsuit for lack of personal jurisdiction.
- The district court permitted limited jurisdictional discovery.
- After discovery, the district court granted DCAG's motion to dismiss, finding that it lacked general personal jurisdiction.
- The plaintiffs (Appellants) appealed the district court's dismissal to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does a U.S. district court have general personal jurisdiction over a foreign parent corporation based on the California contacts of its U.S. subsidiary, where the subsidiary is considered the parent's agent for jurisdictional purposes and exercising such jurisdiction is reasonable?
Opinions:
Majority - Reinhardt, Circuit Judge
Yes. The district court has general personal jurisdiction over DCAG because MBUSA functions as DCAG's agent in California, and the exercise of such jurisdiction is reasonable under the circumstances. The court found that an agency relationship existed for jurisdictional purposes by applying a two-part test. First, MBUSA's services—distributing Mercedes-Benz vehicles in the vast U.S. market—are 'sufficiently important' to DCAG that DCAG would have to undertake them itself or through another representative if MBUSA did not exist. Second, the comprehensive 'General Distributor Agreement' demonstrates that DCAG has the right to control nearly every facet of MBUSA’s operations, satisfying the control element of the agency test. The court then found that exercising jurisdiction was reasonable by weighing seven factors, concluding that DCAG had purposefully interjected itself into the California market, the burden on the sophisticated global corporation was minimal, and the U.S. has a strong interest in providing a forum for human rights claims. Therefore, subjecting DCAG to suit in California comports with 'fair play and substantial justice.'
Analysis:
This Ninth Circuit decision significantly expanded the potential for general personal jurisdiction over foreign parent corporations by endorsing a broad agency theory. By focusing on the 'sufficient importance' of the subsidiary's services and the parent's mere 'right to control' rather than day-to-day operational control, the court lowered the bar compared to the more stringent 'alter ego' test. This ruling created a circuit split and made it easier for plaintiffs to bring foreign corporations into U.S. courts for conduct occurring anywhere in the world, so long as a U.S. subsidiary had substantial local contacts. This specific holding was later unanimously reversed by the U.S. Supreme Court, which held that a subsidiary's contacts are not enough to subject a parent to general jurisdiction unless the subsidiary is so dominated that it is essentially 'at home' in the forum state.
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