Clifford Chance

U.S. Supreme Court Limits U.S. Courts’ Jurisdictional Reach Over Foreign Corporations with U.S. Subsidiaries

27 January 2014

On January 14, 2014, the U.S. Supreme Court held that the Due Process Clause of the U.S. Constitution bars a U.S. court from exercising personal jurisdiction over a foreign corporation for the actions of a foreign subsidiary that took place outside the United States, even where that corporation also has a U.S. subsidiary. In Daimler AG v. Bauman, workers at a plant operated by Mercedes Benz Argentina, a subsidiary of Daimler AG, sued Daimler in a federal district court in California for Mercedes Benz Argentina’s alleged role in publicizing its employees union status thus making them targets of the Argentine military and police forces. The Supreme Court rejected the lower appellate court’s decision that the California district court had personal jurisdiction over Daimler because a U.S.-based subsidiary of Daimler provided “important” services to Daimler in California. The Court’s decision makes clear that mere corporate presence in a state by means of a corporate affiliate cannot support jurisdiction over multinational corporations for claims involving a separate foreign affiliate.

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