For decades, U.S. courts have been preferred venues
for plaintiffs’ lawyers seeking to sue non-U.S. companies. This is due to the
perception that American juries award vastly greater recoveries than those
outside the United States, and also because of the expansive discovery
opportunities U.S. courts offer (despite recent efforts to narrow federal
discovery rules, discovery is unlikely to be limited anytime soon). However,
globalization, which makes highly-desirable U.S. markets accessible to non-U.S.
providers of goods and services, has enhanced concerns over the consequences of
offshore companies availing themselves of the U.S. market.
Perhaps surprisingly,
U.S. courts have been slow to provide guidance. The U.S. Supreme Court did not
issue its decision in Daimler AG v. Bauman (clarifying
the Court’s 2011 decision in Goodyear Dunlop Tires Opns, S.A.
v. Brown), until early 2014. Daimler declined
to permit the exercise of personal general jurisdiction over the parent company
(the German Mercedes manufacturer) of a U.S. subsidiary (MBUSA in a case where
Argentine plaintiffs sought to sue the German company for claims arising out of
activities in Argentina). The Court essentially ruled that if a company is not
(1) incorporated in, or (2) headquartered in the United States, it cannot be
sued here for any claim unrelated to specific conduct by the foreign company in
the United States.
The Daimler decision appears to have inspired
confidence that non-U.S. companies need no longer be so concerned about being
hauled into U.S. courts they deem hostile—even where they establish local U.S.
subsidiaries to conduct business important, or even critical, to the parent
company’s business. Such confidence may, or may not, be warranted.
First, it is important
to understand the difference between general and specific jurisdiction.
Generally, pursuant to specific jurisdiction, a non-U.S. company can always be
sued in the United States in the federal or local courts of a state where it
has engaged in activity, or to which it has directed activity, for claims
arising out of such conduct. The Daimler case
addressed only general jurisdiction, the ability of a U.S. court to exercise
personal jurisdiction over a non-U.S. company on any claim, irrespective of the situs
of the conduct. That question turns on U.S. constitutional principles analyzed
in Daimler. But theDaimler analysis
occurred where the plaintiff sought to justify jurisdiction on an
"agency" theory, claiming Mercedes’ U.S. subsidiary was the German
manufacturing company’s agent, and thus a representative through which the
non-U.S. parent could be sued. The Supreme Court ultimately rejected that argument.
But Daimler did not address, among other
things, circumstances that might constitute a waiver of any objection to
personal jurisdiction. Under longstanding U.S. law, subject matter jurisdiction
(the ability of the court to entertain a specific type of controversy) cannot
be waived; but personal jurisdiction can always be
waived. So what happens, for example, if the non-U.S. company, in order to
conduct specific, narrowly focused activities in a U.S. state, is compelled to
register to do business, and to do that, must appoint an agent specifically to
accept service of process directed to the foreign company? Can the foreign
company now be sued for conduct unrelated to
any in-state activity based on consented-to in-state service of process on the
appointed designated agent?
The answer is not so
clear. Indeed, relatively recently in Delaware, two federal judges reached
opposite conclusions. The issue was resolved only this year by the Delaware
Supreme Court in Genuine Parts Co. v. Cepec. The Delaware court
reasoned that its state’s registration statute could not be read "as a
broad consent to personal jurisdiction in any cause of action, however
unrelated to the foreign corporation’s activities in Delaware." But this
case interprets Delaware’s statute only. The court recognized that all 50
states and the District of Columbia have enacted their own registration
statutes, all requiring foreign corporations to register and appoint an
in-state agent for service of process.
And while disagreeing on the outcome of
cases in other states, the court conceded that, even post-Daimler, some
courts have held "that implied consent by virtue of simple registration
... remains a constitutionally valid basis for general jurisdiction over a
nonresident corporation."
Daimler addressed
facts particularly unsympathetic to the most liberal jurisdictional principles.
Future decisions will likely test its holding under more compelling facts. And
waiver/consent issues, such as those presented by corporate registration
statutes, have yet to be addressed definitively. For these reasons, non-U.S.
companies that avail themselves of U.S. markets should approach Daimler with caution, and seek advice
from U.S. counsel to assess their jurisdictional exposure.
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