Ninth Circuit Find Personal Jurisdiction Over DamilerChrysler AG under the ATS; Upholds “Agency” Rather than Alter-Ego Jurisdiction

Bauman, et al. v. DaimlerChrysler, et al., No. 07-15386 (9th Cir. 18 May 2011), 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. 

We have previously discussed the Eleventh Circuit decision in Baloco, et al. v. Drummond Co., No. 09-16216 (11th Cir. Feb. 2011), which reinstated claims under the ATS against a corporate entitty.  And note also must be made of the Second Circuit’s important decision in Kiobel, et al. v. Royal Dutch Petroleum Co., et al., 06-4800-cv, 06-4876-cv (2d Cir. 17 Sept. 2010) (which we discuss here), in which the Second Circuit held that the ATS does not subject a corporation (as opposed to natural persons) to liability.  The Ninth Circuit does not address Kiobel or Baloco but does remand for further proceedings after addressing at length the issue of personal jurisdiction, which one might consider to come after a decision, even if implicit, that claims against DCAG fall under the ATS.

In terms of personal jurisdiction, noteworthy international practice rulings in Bauman include:

First, the Ninth Circuit found personal jurisdiction over the German parent DCAG by reason of the contacts in the U.S. of its subsidiary Mercedes-Benz USA (MBUSA).  The Court of Appeals did not address the issue of specific personal jurisdiction but rather general jurisdiction over DCAG, since the claims did not arise out of the non-U.S. corporation’s activities in California (where the case was brought).  The Ninth Circuit ruled that the requisite contacts over the parent could be found in one of two ways:  either through the alter “ego test” of through the “agency” test.   Readers of this blog will recall our recent four-part treatment (the most recent of which is here) of the related issue what we described as the principal-agency conundrum for securing jurisdiction in the U.S.  The Ninth Circuit’s articulation of 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) — and asks a second question as well, that is, “an element of control, albeit not as much control as is required to satisfy the ’alter ego’ test”.    The Circuit finds this two-part test satisfied by reason of the importance to Mercedes Benz of the U.S. subsidiary’s business.

Second, the Circuit examined the “extent of conflict wih 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) (“[g]reat care and reserve should be exercised when extending our notions of personal jurisdiction into the international field”), and acknowledging that “German courts have expressed some concern that this suit may impinge upon German sovereignty”, 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 finds 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”.

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