When Can A Corporation Be Sued? Supreme Court’s Recent Decision May Signal A Change

There are venues in certain corners of the United States that exert a magnetic pull on plaintiffs’ attorneys everywhere. In Madison County, Illinois more than 800 asbestos cases are filed annually, 90% by out-of-state plaintiffs. In the Eastern District of Texas, shell “patent troll” companies rent empty offices to create “headquarters” from which to file over 1,000 patent infringement cases per year. Driven by statistics showing plaintiff-friendly judges or astronomical jury awards, plaintiffs’ lawyers travel to these venues to haul in the next big catch. But a new decision from the nation’s highest court might signal the death knell for “forum shopping.”

n Daimler AG v. Bauman, several Argentines sued the German car-maker Daimler AG in a California Federal District Court claiming that the company collaborated with state security forces to kidnap, torture, and kill some of its own employees during Argentina’s 1976-1983 “Dirty War.” None of the events giving rise to the suit had taken place in California. The Ninth Circuit held that Daimler was answerable to any lawsuit in California through its agent, Mercedes-Benz USA, LLC, a Delaware limited liability corporation with multiple California-based facilities.

The Supreme Court unanimously reversed the Ninth Circuit in an extremely broadly worded decision. The Court said that, when the suit does not arise out of the defendant’s contacts with the forum state, it can only be subject to “general”, rather than “specific” personal jurisdiction. The court then said that in order for a company to be subject to general jurisdiction in a state, it must have contacts with the state that are so “continuous and systematic as to render [the company] essentially at home” there. The Court gave a very limited definition of what it means for a company to be “at home,” listing the place of incorporation, the principal place of business, and maybe nowhere else.

Assuming that state courts begin to follow the Daimler decision, plaintiffs’ lawyers will no longer be able to file suit in some random plaintiff-friendly forum that has no connection to the parties or the cause of action. After Daimler, a plaintiff’s potential forum may well be limited to at most three states: the state where the events took place, the state where the defendant is incorporated, and the state where the defendant has its principal place of business.

We will monitor the impact of Daimler with curiosity, particularly here in Maine , and will report back with any developments.

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