Bauman v. Daimlerchrysler Corp., 07–15386.

• Decision Date: 09 November 2011
• Docket Number: No. 07–15386.,07–15386.
• Parties: Barbara BAUMAN; Gregory Grieco; Josefina Nunez; Gabriele Nunez; Miriam Nunez; Silvia Nunez; Emilio Guillermo Pesce; Mirta Haydee Arenas; Graciela Gigena; Guillermo Alberto Gigena, Nuria Gigena; Amelia Schiaffo; Elba Leichner; Anunciacion Spaltro De Belmonte; Hector Ratto; Eduardo Olasiregui; Ricardo Martin Hoffman; Eduardo Estiville; Alfredo Manuel Martin; Juan Jose Martin; Jose Barreiro; Alejandro Daer, Plaintiffs–Appellants, v. DAIMLERCHRYSLER CORPORATION; DaimlerChrysler AG, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

11 Cal. Daily Op. Serv. 13,733

2011 Daily Journal D.A.R. 16,389

676 F.3d 774

Barbara BAUMAN; Gregory Grieco; Josefina Nunez; Gabriele Nunez; Miriam Nunez; Silvia Nunez; Emilio Guillermo Pesce; Mirta Haydee Arenas; Graciela Gigena; Guillermo Alberto Gigena, Nuria Gigena; Amelia Schiaffo; Elba Leichner; Anunciacion Spaltro De Belmonte; Hector Ratto; Eduardo Olasiregui; Ricardo Martin Hoffman; Eduardo Estiville; Alfredo Manuel Martin; Juan Jose Martin; Jose Barreiro; Alejandro Daer, Plaintiffs–Appellants,

v.DAIMLERCHRYSLER CORPORATION; DaimlerChrysler AG, Defendants–Appellees.

No. 07–15386.

United States Court of Appeals, Ninth Circuit.

Nov. 9, 2011.

Terrence Patrick Collingsworth, Esquire, Senior Partner, Natacha H. Thys, Esquire, Senior, Conrad & Scherer, LLP, Washington, DC, Paul Hoffman, Schonbrun Desimone Seplow Harris Hoffman & Harrison, LLP, Venice, CA, for Plaintiffs–Appellants.

Peter J. Messrobian, Esquire, Sedgwick LLP, Matthew James Kemner, Esquire, Carroll, Burdick & McDonough, LLP, San Francisco, CA, Thomas Henderson Dupree, Jr., Daniel W. Nelson, Esquire, Theodore Olson, Amir C. Tayrani, Gibson Dunn & Crutcher, LLP, Washington, DC, for Defendants–Appellees.

D.C. No. CV–04–00194–RMW, Northern District of California, San Jose.

Before: MARY M. SCHROEDER, DOROTHY W. NELSON, and STEPHEN REINHARDT, Circuit Judges.

Order; Dissent by Judge O'SCANNLAIN.

ORDER

The panel has voted unanimously to deny the petition for rehearing. Judge Schroeder and Judge Reinhardt have voted to deny the petition for rehearing en banc, and Judge Nelson so recommended.

A judge of the court called for a vote on the petition for rehearing en banc. A vote was taken, and a majority of the active judges of the court failed to vote for en banc rehearing. Fed. R.App. P. 35(f).

The petition for rehearing and the petition for rehearing en banc are DENIED. No further petitions for panel or en banc rehearing will be entertained.

O'SCANNLAIN, Circuit Judge, joined by TALLMAN, BYBEE, CALLAHAN, BEA, M. SMITH, IKUTA, and N.R. SMITH, Circuit Judges, dissenting from the denial of rehearing en banc:

Our court today extends the reach of general personal jurisdiction far beyond its breaking point. Its holding, that federal courts have personal jurisdiction over a German corporation for its Argentinian subsidiary's alleged activities in Argentina based simply on having a separate U.S.-based subsidiary, is an affront to due process. The panel ignores the Supreme Court's warnings that the Due Process Clause permits “defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (internal quotation marks omitted). We thus place ourselves at odds again with the dictates of the Supreme Court, which has never approved such a broad jurisdictional reach as in this case. Moreover, our decision today is inconsistent with the law of at least six of our sister circuits. I therefore dissent from our regrettable failure to rehear this case en banc.

I

The facts pertinent to this appeal are relatively straightforward. Twenty-two Argentinian residents brought suit in the Northern District of California against DaimlerChrysler A.G. (“Daimler”), a German corporation, alleging that one of its subsidiaries, Mercedes–Benz Argentina, engaged in human rights violations in Argentina during that country's “Dirty War” in the 1970s and 1980s. Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 911–12 (9th Cir.2011). Without need for an evidentiary hearing, the district court properly dismissed the suit for lack of personal jurisdiction over Daimler. Id. at 913.

On appeal, the panel initially affirmed the district court. Bauman v. DaimlerChrysler Corp., 579 F.3d 1088 (9th Cir.2009), vacated, 603 F.3d 1141 (9th Cir.2010). Then—after granting rehearing and without additional oral argument—the panel inexplicably changed its mind and reversed the district court, holding that Daimler was indeed subject to general jurisdiction in California based solely “through the contacts of its subsidiary Mercedes–Benz USA.” Bauman, 644 F.3d at 912. In so holding, the panel drastically expands the reach of personal jurisdiction beyond all constitutional bounds.

No one disputes that Daimler itself lacks sufficient contacts with California to render it subject to general personal jurisdiction there. Nor does anyone dispute that Daimler's U.S.-based subsidiary, Mercedes–Benz USA, does have sufficient contacts with California to render it subject to general personal jurisdiction. See Bauman, 644 F.3d at 920 n. 11. But Mercedes–Benz USA was not joined as a party to this lawsuit. The only question, then, is whether Mercedes–Benz USA's mere existence in California renders Daimler subject to general personal jurisdiction for matters arising in Argentina without violating the Due Process Clause. See id. at 920.

II

As the Supreme Court recently reaffirmed, for a foreign corporation to be subject to general jurisdiction, its contacts with the forum state must be “so continuous and systematic as to render [it] essentially at home in the forum State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, –––U.S. ––––, 131 S.Ct. 2846, 2851, 180 L.Ed.2d 796 (2011). Our court today undermines this stringent standard by inventing a new test for general personal jurisdiction that gives Daimler no “minimum assurance as to where ... conduct will and will not render [it] liable to suit.” Burger King Corp., 471 U.S. at 472, 105 S.Ct. 2174 (internal quotation marks omitted).¹

A

Under our case law, there are two separate tests for determining whether a subsidiary's contacts can be imputed to a parent corporation for purposes of general jurisdiction. Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir.2001). One test, the alter ego test, requires a showing “(1) that there is such unity of interest and ownership that the separate personalities [of the two entities] no longer exist and (2) that failure to disregard [their separate identities] would result in fraud or injustice.” Id. (internal quotation marks omitted). The panel correctly concludes that this test is not at issue here because there is no reasonable argument that Daimler controls Mercedes–Benz USA “to such a degree as to render the latter the mere instrumentality of the former.” Id. (internal quotation marks omitted); see Bauman, 644 F.3d at 920.

Yet the panel finds general jurisdiction over Daimler here by reformulating our other test, the agency test. See id. at 931. As interpreted by the Bauman panel, the agency test requires two showings: First, the subsidiary's services must be “sufficiently important to [the parent] that they would almost certainly be performed by other means if [the subsidiary] did not exist, whether by [the parent] performing those services itself or by [the parent] entering into an agreement with a new subsidiary or a non-subsidiary national distributor for the performance of those services.” Id. at 922. ² Second, it must be shown that the parent has “the right to substantially control” the subsidiary's activities. Id. at 924.³ In redefining the agency test, the panel drastically expands our test for personal jurisdiction and ignores the bedrock concerns of fundamental fairness that underpin Supreme Court due process jurisprudence.

B

The panel's interpretation of the agency test is far too expansive and threatens to make innumerable foreign corporations unconstitutionally subject to general personal jurisdiction in our courts. Indeed, it is difficult to see what limits there are on the panel's formulation. Anything a corporation does through an independent contractor, subsidiary, or distributor is presumably something that the corporation would do “by other means” if the independent contractor, subsidiary, or distributor did not exist. Bauman, 644 F.3d at 922.

Such a result surely cannot be squared with the Supreme Court's repeated admonitions that due process must permit “defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.” Burger King Corp., 471 U.S. at 472, 105 S.Ct. 2174 (quoting World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)) (internal quotation mark omitted). While the panel seems to be treating personal jurisdiction lightly—perhaps even as a mere technicality—we must not forget that limits on personal jurisdiction have constitutional underpinnings. See Brown, 131 S.Ct. at 2853 (“The Due Process Clause of the Fourteenth Amendment sets the outer boundaries of a state tribunal's authority to proceed against a defendant.”).

Moreover, our court now seemingly rejects respect for corporate separateness, a well-established “principle of corporate law deeply ingrained in our economic and legal systems.” United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) (internal quotation marks omitted). It is “[a] basic tenet of American corporate law ... that the corporation and its shareholders are distinct entities,” over which jurisdiction must be individually established. Dole Food Co. v. Patrickson, 538 U.S. 468, 474, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003). “Where two corporations are in fact separate”—as they irrefutably are here—“permitting the activities of the subsidiary to be used as a basis for personal jurisdiction over the parent violates this principle and thus due process.” Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir.2000); cf. J. McIntyre Mach., Ltd. v. Nicastro, ––– U.S. ––––, 131 S.Ct. 2780, 2797, 180 L.Ed.2d 765 (2011) (Ginsburg, J., dissenting) (“A few points on which there should be no genuine debate bear statement at the outset.... [A]ll agree, [the parent company] surely is not subject to general (all-purpose) jurisdiction in New...