Finding Personal Jurisdiction by Imputation and Watering Down "Agency" Test for Finding Jurisdiction, Say 8th Circuit Judges Who Would Grant Rehearing En Banc
By Louis M. Solomon
Bauman, et al. v. DaimlerChrysler,
et al., No. 07-15386 (9th Cir. 18 May
2011) [enhanced
version available to lexis.com subscribers ],
involves claims by 22 Argentinian residents against DaimlerChrysler
Aktiengesellschaft (DCAG) and its Argentinian subsidiary alleging that Mercedes
Benz (owned by DaimlerChrysler) collaborated with Argentine state security
forces to kidnap, detain, torture, and kill plaintiffs and/or their family members
during Argentina's "Dirty War" in the late 1970s (when the military overthrew
President Isabel Peron). The claims were asserted under the Alien Tort
Statute (ATS), 28 U.S.C. § 1350 [enhanced
version ], though the significant aspects of
the decision relate to personal jurisdiction, and the rulings in that regard
are not limited to the ATS but will have applicability broadly to international
litigation of all kinds.
When we posted on Bauman, et al. v. DaimlerChrysler Corp. et al., last
spring, we pointed out that the Ninth Circuit taught that, even in
the absence of a finding of specific personal jurisdiction arising from
specific acts done in connection with the specific cause of action
under review, personal jurisdiction over the German parent DCAG by reason of
the contacts in the U.S. of its subsidiary Mercedes-Benz USA (MBUSA) could
arise in one of two ways: either through the alter "ego test" of through
the "agency" test.
Readers of this blog might recall
our four-part treatment (the most recent of which is here)
of the related issue that we described as the principal-agency conundrum for
securing jurisdiction in the U.S. The Ninth Circuit
articulated the "special importance" of the services performed by the subsidiary
- that is, if the parent did not have a subsidiary in the U.S., "the
corporation's own officials would undertake to perform substantially similar
services" (quoting earlier Circuit authority). The Court of Appeals also
asked a second question as well, that is, whether there existed "an
element of control, albeit not as much control as is required to satisfy
the 'alter ego' test". The Circuit found this
two-part test satisfied by reason of the importance to Mercedes Benz of the
U.S. subsidiary's business.
In the earlier panel
decision, the Circuit also examined the "extent of conflict with the
sovereignty of the defendant's state", even though not dispositive.
Quoting the Supreme Court's decision in Asahi Metal Indus. v. Superior Court,
480 U.S. 102 (1987) [enhanced
version ] ("[g]reat care and reserve should
be exercised when extending our notions of personal jurisdiction into the
international field"), the Ninth Circuit concluded that personal jurisdiction
over the non-U.S. parent was nonetheless proper given that nearly 50% of DCAG's
overall revenue comes from the U.S., "and sales of DCAG vehicles in the United
States accounted for 1% of this country's GDP". The Court of Appeals
so found despite misgivings expressed by courts in Germany. It found,
finally, that DCAG did not meet "its burden of presenting a compelling case
that the exercise of jurisdiction would not comport with fair play and
substantial justice".
In the decision just issued, Bauman, et al. v. DaimlerChrysler Corp., et
al. (denial of rehearing en banc), No. 07-15386 (9th Cir. Nov. 2011) [enhanced
version ], the Court of Appeals voted
unanimously to deny the petition for rehearing. The petition also sought
rehearing by the entire Ninth Circuit. This too was denied, but eight
judges dissented from that denial in an opinion that merits review for the
international litigation issues that we have raised.
The opinion dissenting from the
denial of en banc review does not mince words. It begins:
Our court today extends the reach of
general personal jurisdiction far beyond its breaking point. Its holding, that
federal courts have personal jurisdiction over a German corporation for its
Argentinian subsidiary's alleged activities in Argentina based simply on having
a separate U.S.-based subsidiary, is an affront to due process.
In addition to arguing that the
panel's decision is contrary to U.S. Supreme Court jurisprudence, the
dissenting opinion focuses on the fact that the panel decision "seemingly
rejects respect for corporate separateness, a well-established 'principle of
corporate law deeply ingrained in our economic and legal systems'".
The dissenters also argue that the panel holding "is an affront to international
comity and threatens the ability of the Executive Branch to execute its foreign
affairs duties" and "may also have unpredictable effects on foreign policy and
international comity".
We will follow the next phase of
this litigation.
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