Supreme Court Limits Reach of General Jurisdiction for Corporations

The Supreme Court’s decision in Daimler AG v. Bauman (Jan. 14, 2014), dealing with the topic of “general jurisdiction,” significantly limits a plaintiff’s options as to where to bring a lawsuit. 

The Supreme Court, going back at least as far as the classic case of Pennoyer v. Neff, 95 U.S. 714 (1878), has recognized that there are territorial limits to a court’s jurisdiction.” In other words, for a defendant to be subject to a lawsuit in a particular state’s courts, the defendant must have some connection to that state. Over time, the courts have defined the necessary connection as being either “specific” or “general.” Specific jurisdiction exists if the lawsuit relates to the defendant’s contacts with the state – for example, the plaintiff is suing for an injury that happened in the state. General jurisdiction, in contrast, is unrelated to the facts of the particular lawsuit but instead is based on a defendant’s general relationship to a particular state. 

The Daimler opinion highlights the limits of general jurisdiction, explaining that it applies only to a corporation’s “home” state. A corporation will always be at home in its state of incorporation and in the state where it has its principal place of business. It will be at home in any other state, however, only in “exceptional” cases. In particular, a corporation is not at home in a state simply because it has continuous and systematic contacts with that state.   

The significance of this holding is seen in the facts of the case. The plaintiff sought to sue Daimler AG in California based on the California contacts of a subsidiary, Mercedes-Benz USA. The Court assumed for purposes of the opinion that the contacts of Mercedes-Benz USA to California were attributable to the parent company. Those contacts are substantial: Mercedes-Benz USA has multiple California offices, including a regional headquarters in the State, and over ten percent of the company’s sales are in California. The Court held that this was nevertheless insufficient to subject Daimler AG to general jurisdiction in California, given that Mercedes-Benz USA is neither incorporated in California nor has its principal place of business there.

Practical Tips: 

• For litigators, assume that a corporation is subject to general jurisdiction only in its state of incorporation or its principal place of business. There may be exceptions, but your case probably isn’t one of them. 
• For corporate lawyers, think carefully about your client’s state of incorporation. It is likely to be one of (at most) only two states where the client is subject to general jurisdiction.  So choose wisely.