Supreme Court Action: Jurisdiction in Foreign Human Rights Cases and Class Actions

The Supreme Court issued two opinions yesterday and one today.  The first of these is Daimler AG v. Bauman et al. (11-965).  Twenty-two residents of Argentina sued Daimler in California under the Alien Tort Statute and the Torture Victim Protection Act alleging that Mercedes-Benz Argentina collaborated with the Argentinian government to kidnap, detain, torture, and kill MB Argentina workers between 1976 and 1983.  The issue in the case before the Court is whether Daimler, via its US subsidiary MBUSA, had enough contacts with California to support jurisdiction in the California courts.  The District Court said no.  The Court of Appeals for the Ninth Circuit said yes.  That Court assumed that principles of general jurisdiction allowed the District Court to hear the case.  The Supreme Court reversed the Court of Appeals.

The Court analyzed principles of specific and general jurisdiction.  The former applies in situations where the suit is based on the defendant’s contacts with the forum.  General jurisdiction covers situations where the corporate activity within a specific state is so substantial to support a cause of action unrelated to those activities.  MBUSA is incorporated under Delaware law and has its principle place of business in New Jersey.  It sells about 10% of cars in California and those same California sales accounts for 2.4% of Daimler’s worldwide sales.  There are several facilities related to management and vehicle preparation located in California as well.  Although MBUSA was a wholly owned subsidiary, it operated as an independent business and is treated as an independent contractor.

The Court held that the general theory of general jurisdiction centered on state of incorporation and principle place of business.  The matter was complicated further because of procedural issues.  Plaintiffs never tried to assert specific jurisdiction against Daimler, nor did they appeal the decision that Daimler’s contacts with California were two sporadic to support jurisdiction.  They did not assert that Daimler was the alter ego of MBUSA as well.  Daimler did not object to plaintiff’s assertion that California could exercise general jurisdiction over the company.

The Court assumed that California was a home state but still said the contacts were insufficient under the Ninth Circuit’s agency theory supporting jurisdiction.  It rested on the basis that MBUSA’s activities were important enough that Daimler would undertake them if MBUSA did not exist.  Daimler would be liable for suit in any state in which it does business of that were the case.  Principles of general jurisdiction can’t support this, especially considering that the subject of the litigation did not take place in the United States.  The Court briefly mentioned its earlier decisions in Kiobel v. Royal Dutch Petroleum Co. and Mohamed v. Palestinian Authority as rendering the claims infirm in any event under the two statutes.  These two cases may have solved the problem in one sense, but the Court would not let the Ninth Circuit’s theory of jurisdiction stand.

Justice Ginsburg delivered the opinion of the Court.  All justices joined in the opinion with the exception of Justice Sotomayor who wrote a separate opinion concurring in the judgment only.

The second case from yesterday is Mississippi ex rel. Hood v.  AU Optronics Corp. (12-1036).  The case concerns the application of the Class Action Fairness Act of 2005 (CAFA) to a situation where there is only one named plaintiff in the suit.  The State of Mississippi filed an action against LCD manufacturers in state court under state law for allegedly forming an international cartel to restrict competition and raise prices in the LCD market.  The manufacturers removed the case to federal court under the Act.  It authorizes class actions and mass actions “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve a common question of law or fact.”  The District Court held that the case was a mass action but remanded the case back to state court under the Act’s general public exception.  The Fifth Circuit upheld the mass action result but held that the general public exception did not apply.

The Supreme Court reversed, holding that the case is not a mass action as Mississippi is the only named plaintiff.  The Court noted that the language of the statute did not include unnamed plaintiffs as qualifying for a mass action.  CAFA uses “persons” and “plaintiffs” in the same language as FRCP 20 which contemplates named individuals as plaintiffs.  The statute also requires plaintiffs to have claims exceeding $75,000.  Unnamed plaintiffs would make this a jurisdictional nightmare and something Congress would not have intended.

The statute additionally provides that transfer will not take place unless a majority of the plaintiffs request it.  That can’t happen with unnamed plaintiffs in the suit.  Other statutory language suggests that relaxed jurisdictional rules for class actions not apply to mass actions.  The Court assumes that Congress was deliberate in the way it wrote the statute.  Justice Sotomayor delivered the opinion for a unanimous Court.

I’ll cover today’s opinion in a post on Thursday.

Mark

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