New Limits On General Personal Jurisdiction: Where Is An Out-of-State or Foreign Corporation “At Home”?

One of the first questions that must be asked (and answered quickly) when a lawsuit is filed in federal court is whether personal jurisdiction may be exercised over the defendant.  Personal jurisdiction may be predicated on either specific jurisdiction or general (or “all purpose”) jurisdiction.  Specific jurisdiction focuses on the defendant’s contacts with the state in which it is sued and the conduct alleged.  General jurisdiction, on the other hand, is premised on the defendant’s contacts with the forum state, irrespective of whether those contacts relate to the claims being asserted.  General jurisdiction is often phrased as whether the defendant is “at home” in the forum state, usually meaning the place of incorporation or a principal place of business.  If so, it can potentially be sued in its “home” location for conduct that occurred anywhere in the world.

Significant decisions defining the scope of general jurisdiction have been relatively few.  That changed on January 14, 2014 with the U.S. Supreme Court’s potential game-changer in Daimler AG v. Bauman. The question answered by the Court in Daimler was whether the conduct of a foreign corporation’s U.S. subsidiary may subject the foreign corporation to suit in any state in which the U.S. subsidiary makes substantial sales.   Until Daimler, there was a dispute among the circuit courts whether the conduct of a subsidiary may be attributed to a parent corporation for purposes of establishing personal jurisdiction.

In a unanimous decision, the Court said “No.”  Justice Ginsburg explained that whether or not the sales of the U.S. subsidiary in the forum state (California) could be attributed to the parent corporation, Daimler, was inconsequential.  The only relevant issue was whether Daimler itself was “at home” in California.  Because Daimler was not incorporated in California and did not have a principal place of business in California, the Court concluded there was no general jurisdiction over it in California.   The Court reasoned that outside of an “exceptional” case, general jurisdiction will generally be limited to the places where a corporation is incorporated and its principal place of business.  In a significant footnote, the Court recognized that “[g]eneral jurisdiction . . . calls for an appraisal of a corporation’s activities in their entirety, nationwide and worldwide.  A corporation that operates in many places can scarcely be at home on all of them.”

The Bottom Line for Employers: Corporations with national and international operations should carefully scrutinize the personal jurisdiction allegations asserted against it.  If a corporation is sued in a state in which it is not incorporated and does not have a principal place of business, Daimler makes it unlikely (outside of the undefined, “exceptional“ case) that general personal jurisdiction will exist over it.  It also establishes that corporations are not “at home” in every state in which they (or a subsidiary) engage in substantial business, thus significantly narrowing the forums available to plaintiffs in lawsuits against out-of-state and foreign corporations.

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