April 29, 2013
A few days after issuing the Kiobelruling restricting the scope of the Alien Tort Statute (ATS), the Supreme Court has agreed to hear another case dealing with the ambiguous law often used to bring civil actions for human rights violations committed abroad.
In many ATS cases, both the underlying facts and litigants have few connections to the United States. That was the case in Kiobel, which involved Nigerian plaintiffs suing a Nigerian subsidiary of the oil giant Shell for alleged actions taking place in Nigeria.
In Kiobel, the Court held that there was a strong presumption against the extraterritorial application of American law to actions taking place outside of the nation’s borders. This presumption, the opinion authored by Chief Justice John Roberts Jr. held, barred an American court from establishing jurisdiction over Shell.
DaimlerChrysler AG v. Bauman, which the Court will hear in its next term, asks the Court to resolve a different but related question: can an American court exercise jurisdiction “over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant” in the United States? The plaintiffs in the case have accused an Argentinean subsidiary of DaimlerChrysler (the auto companies were still together when the case was filed) of collaborating with Argentinean officials in kidnapping, torturing, and killing former employees of the subsidiary. They sued DaimlerChrysler, a German company, in California by obtaining jurisdiction through the automaker’s American subsidiary.
On the surface, it looks like another ATS case. Perhaps the Court, as Justice Anthony Kennedy suggested in his concurring opinion in Kiobel, will provide further guidance on the scope and reach of the statute. The Court may do just that. The case also provides the Court with an opening to change the law far beyond the ATS, which only saw about a dozen new cases a year, by redefining the contours of the reach of America’s courts.
The series of facts that led to a lawsuit in a federal court in California for actions committed thousands of miles away is typical of the complexities that arise in establishing jurisdiction, which tends to be among the trickiest areas of the law. Generally, a court can establish jurisdiction over a person that has connections to the court’s locale. It makes little sense, for instance, to try a case in Missouri of two New Yorkers who get into a car accident in New York: neither the parties nor the dispute in this example have any connections to the Show-Me state.
With corporations, however, the issue of jurisdiction gets more complicated. Multinational corporations rely upon a host of subsidiaries, joint-ventures, and other business partnerships to run their global operations: Daimler listed 557 subsidiaries and other related entities across the world in 2011. Should an act by one of these units allow a court to establish jurisdiction with any of its sister organizations or the parent in charge of the entire enterprise?
In earlier rounds of the case, the plaintiffs pointed out that Daimler conducted a significant amount of business in the United States – and California in particular. Daimler’s American operations also included a regional office in Costa Mesa, California and a vehicle preparation center about 30 miles away. After a lengthy but typical analysis, the Ninth Circuit Court of Appeals found that a district court in California could establish jurisdiction over Daimler, the parent corporation, through its American subsidiary’s extensive and continuous activities in the U.S.
It’s not clear what the Court will do in Bauman at this point. The justices have left some hints along the way, however. During Kiobel‘s first round of oral arguments last February, Justice Samuel Alito questioned the applicability of American law to the lawsuit:”What does a case like that have in the courts of the United States?” Before the council responded to his question, the justice answered: “There’s no connection to the United States whatsoever.”
Justice Stephen Breyer also provided some potential insight on the issue in his separate opinion in Kiobel. He argued for a different application of the ATS – one not based on the concept of extraterritorial application. Yet, the looser standard he recommended would have led to the same result reached by the majority ruling. A small corporate presence, Justice Breyer explained, referring to the connection of the Shell parent companies based in Europe to the United States, were insufficient to establish jurisdiction.
In Kiobel, the plaintiffs tried to establish jurisdiction over Shell in much the same way as Baumann: through the connection of two separate subsidiaries – one in the U.S., one abroad – to a company headquartered in Europe. At first glance, that similarity points to an identical and straightforward result for the Court. On the other hand, the justices could use the case as an opportunity to redefine the jurisdictional reach of American courts over large-scale corporations.
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