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From Products Liability Law Daily, July 8, 2014

German auto maker escapes California jurisdiction despite subsidiary’s activities

By Pamela C. Maloney, J.D.

A German automobile manufacturer was not subject to general personal jurisdiction in California on the basis of the substantial contacts of current and former indirect subsidiaries in the state, a California court of appeal found in an opinion designated not for publication in the official reports (Young v. Daimler AG, July 7, 2014, Reardon, T.).

Background. The driver of a 2004 Jeep Cherokee manufactured by DaimlerChrysler Corporation (DCC), a former indirect subsidiary of Daimler AG, was rendered a permanent paraplegic when the vehicle rolled over and the roof collapsed on her. The driver and her daughter, who was a passenger in the car at the time of the accident, filed a products liability action against Daimler and DCC, alleging that the roof and restraint systems of the vehicle were defectively designed. Daimler moved for dismissal on the ground that there was no basis for personal jurisdiction—either general or specific—over the company in California. The trial court agreed and granted Daimler’s motion to quash service of summons. The court of appeal stayed its decision pending the U.S. Supreme Court’s decision in Daimler AG v. Bauman, (2014) 571 U.S. ___ [134 S.Ct. 746] (Bauman II).

Driver’s arguments. The driver argued that specific jurisdiction was proper because the accident at issue was related to the California activities of DCC, Daimler’s indirect subsidiary. In support of a finding of general jurisdiction, the driver argued that the U. S. Court of Appeals for the Ninth Circuit’s decision inBauman v. DaimlerChrylser Corp., (2011) 644 F.3d 909 (Bauman I), which found Daimler subject to general jurisdiction in California based on the extensive California contacts of Mercedes-Benz USA, LLC (MBUSA), an indirect subsidiary of Daimler.

Daimler’s arguments. Daimler argued that general jurisdiction was lacking because it was not qualified, licensed, or authorized to do business in California; does not maintain any office, agency, or representative in California; does not have any officers, employees or agents working for it in California; has not appointed an agent for service of process in California; does not conduct advertising or solicitation activities in California; does not operate any sales or service network in California; does not have a California bank account; does not own, use, or possess any California real estate; and does not pay California taxes. Daimler also noted that to the extent any Mercedes-Benz vehicles manufactured by Daimler in Germany were distributed in California, those activities were conducted by companies separate and distinct from Daimler. Finally, Daimler argued that the facts did not support a finding of specific jurisdiction because it did not design, manufacture, or distribute the vehicle at issue.

General jurisdiction. In Baumann II, the U.S. Supreme Court reversed the Ninth Circuit’s decision in Bauman I, noting that the issue before it was “whether the assertion of personal jurisdiction over Daimler under the facts of the case comports with the limits imposed by federal due process.” A review of the limited number of precedents addressing the issue of general jurisdiction led the High Court to conclude that “only a limited set of affiliations with a forum will render a defendant amenable to all-purpose jurisdiction there.” In addition to a corporation’s place of incorporation and principal place of business, which were “paradigm all–purpose forums,” the Supreme Court recognized that in an exceptional case, a corporation’s operations outside of the paradigm forums could be so substantial and of such a nature as to render the corporation at home in that state. The High Court also noted that it had not yet addressed whether a foreign corporation could be subject to a court’s general jurisdiction based on the contacts of its in-state subsidiary and was critical of the Ninth Circuit’s agency test as applied in Bauman I.

In the wake of the Supreme Court’s decision, the California Court of Appeal found that Daimler’s activities in the state did not approach the level that would render the company “at home” in the state. The driver, however, argued that Bauman II should be confined to its particular facts, i.e., to cases involving foreign parties with no connection to California. However, that argument missed the essential difference between specific and general jurisdiction. The test set forth in Baumann II—whether the foreign defendant was essentially at home in the forum state—focused on the defendant’s significant corporate presence in the forum, not on the plaintiff’s relationship with the forum (plaintiff’s domicile, place of injury, place of purchase, etc.). The court of appeal further noted that a plaintiff’s relationship to the forum had never been the basis for determining general jurisdiction over a defendant.

The Court of Appeal rejected the driver’s second argument that Baumann II did not consider California’s representative services doctrine, which would permit the assertion of general jurisdiction over Daimler. This doctrine is a species of agency and the court in Bauman II, while questioning the formulation and application of the Ninth Circuit’s agency test, assumed agency and concluded that MBUSA’s California contacts were insufficient to confer general jurisdiction over Daimler in California.

In light of the Supreme Court’s rejection of the Ninth Circuit’s determination that Daimler was subject to general jurisdiction in California, the appellate court concluded that barring the development of new facts, Daimler was not subject to general personal jurisdiction in California.

The case number is A135999.

Attorneys: Casey Aron Kaufman (The Brandi Law Firm) for Kimberly Patrice Young. Matthew James Kemner (Carroll Burdick & McDonough) for Daimler AG.

Companies: Daimler AG.

MainStory: TopStory JurisdictionNews MotorVehiclesNews CaliforniaNews

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