• The U.S. Supreme Court Limits Jurisdiction Over Foreign Companies
  • March 4, 2014 | Authors: Maria M. Todorova; Prentiss Willson
  • Law Firms: Sutherland Asbill & Brennan LLP - Atlanta Office ; Sutherland Asbill & Brennan LLP - Sacramento Office
  • On January 14, 2014, the U.S. Supreme Court reversed the Ninth Circuit and held that due process prevents a state court from exercising general personal jurisdiction over a foreign corporation based solely on the business activities performed in the forum state by a U.S. subsidiary on behalf of the foreign parent. Residents of Argentina sued DaimlerChrysler, a German company, in California alleging that DaimlerChrysler’s Argentine subsidiary had collaborated with state security forces to commit certain acts. Plaintiffs alleged that California had jurisdiction over the lawsuit because of the California business activities by DaimlerChrysler’s U.S. corporate subsidiary that was incorporated in Delaware with its principal place of business in New Jersey. The Ninth Circuit imputed the U.S. subsidiary’s California contacts to DaimlerChrysler and held that the subsidiary was the parent’s agent for jurisdictional purposes, thereby providing California with general jurisdiction over DaimlerChrysler. The U.S. Supreme Court rejected the Ninth Circuit’s “agency” test for general personal jurisdiction. Moreover, the Court concluded that even if the subsidiary’s California contacts were imputable to its parent, “there still would be no basis to subject DaimlerChrysler to general jurisdiction in California, for DaimlerChrysler’s slim contacts with the State hardly render it at home there.” The Court explained that a corporation’s “home” is typically its place of incorporation and principal place of business. Neither DaimlerChrysler nor its subsidiary was incorporated in California, and neither had its principal place of business there. Accordingly, California could not be DaimlerChrysler’s “home” for jurisdictional purposes. Although there are no direct state tax implications in this case, the decision, along with the Court’s recent opinions in Goodyear Dunlop Tires Operations S.A. v. Brown, 131 S. Ct. 2846 (2011), and J. McIntyre Machinery LTD v. Nicastro, 131 S. Ct. 2780 (2011), and the state court holdings in Griffith v. ConAgra Brands Inc., 728 S.E.2d 74 (W.Va. 2012), and Scioto Insurance Co. v. Okla. Tax Comm’n, 279 P.3d 782 (Okla. 2012), might be the start of a trend to revitalize the Due Process Clause as a limitation on state taxing jurisdiction over multistate businesses. Daimler AG v. Bauman, No. 11-965, 2014 U.S. LEXIS 644 (2014).