On August 26, 2013, ERI submitted an amicus brief to the United States Supreme Court on behalf of the plaintiffs in DaimlerChrysler AG v. Bauman. The case was brought by former employees and family members of deceased employees of the González Catán Mercedes-Benz plant in Argentina against Daimler AG, a German corporation that now owns the plant. The plaintiffs in Bauman allege that the management at the Mercedes-Benz Argentina plant were complicit in torture, forced disappearances, and killings during Argentina’s “Dirty War.” The company allegedly collaborated with the military regime, giving information about persons they considered to be “subversive”, often union activists, knowing that this would result in their kidnapping, torture, and often death. Plaintiffs brought suit in California, where Daimler conducts business through a wholly-owned subsidiary, Mercedes-Benz USA (MBUSA). Defendant Daimler argued that it does not have enough of a presence in California to be sued there, because its subsidiary MBUSA is a separate corporate entity. The Ninth Circuit held that jurisdiction was proper, holding that because MBUSA performed necessary services on behalf of Daimler, it was an “agent” of Daimler, and its presence in California could be attributed to the parent company. In April 2013, the Supreme Court granted certiorari to determine whether it violates the Constitution’s due process clause to allow jurisdiction over Daimler.
ERI’s brief addresses three issues. First, the brief looks at the history and current understanding of due process to argue that agency is a proper basis for evaluating jurisdiction over a corporation. The brief argues that corporations have always been understood to act through agents, and that courts have often asserted jurisdiction over corporations based on agency. Since corporations are legal fictions, they can only act through their agents.
Second, the brief argues that there is no constitutional right to corporate separateness. Looking to the history of the corporate form, when the due process clauses were enacted, corporations were not even allowed to own other corporations. Thus there can be no validity in an argument that this type of separateness would have been considered as a constitutional protection at the time of enactment. Subsequent practice in both state and federal courts has demonstrated that the agency principle is more firmly entrenched than any protection for corporate separateness.
The third issue that the brief addresses regards Daimler’s claim that jurisdiction will create diplomatic or economic difficulties. The brief argues that the historical practice in the U.S. and abroad demonstrates that jurisdiction over agents does not intrude on another nation’s sovereignty. Additionally, a concern over diplomatic problems does not create a constitutional protection.
The Supreme Court heard argument in the case in October 2013. On January 14, 2014, the Supreme Court, in a 9-0 decision, held that Daimler AG could not be held liable through its subsidiary MBUSA for egregious human rights violations. The Court held that even if the subsidiary had enough contact to be subject to suit for actions that occurred elsewhere, and even if the actions of the subsidiary could be imputed to the parent corporation, allowing a suit against the parent would still violate due process.
In its opinion, the Court introduced a new relative standard to decide where a foreign corporation can be sued, which was sharply criticized by Justice Sotomayor, who concurred in the judgment only. Justice Sotomayor stated that the majority deemed Daimler “too big for personal jurisdiction.” The new test looks not only at the connection to the forum, but also to the defendant’s connection to other forums, such that a very large corporation might not be subject to jurisdiction in a place where it has extensive contacts, if it has more extensive contacts elsewhere. Sotomayor also criticized the majority for making such a drastic change when the issue was never even argued below.