Breaking News

New case on foreign corporations (FINAL UPDATE)

FINAL UPDATE 2:55 pm.   This post has been updated to suggest the potentially wider impact of the newly granted case, and the Court’s possible reasons for accepting it.


The Supreme Court on Monday agreed to take on another dispute over lawsuits in American courts against foreign companies, just days after coming close to barring such cases under the Alien Tort Statute.  The new case also involves that same law, but the issue could have a more general impact on lawsuits against business, and might affect state as well as federal courts’ powers.  The issue is whether a corporation may be sued based solely on the fact that it has an indirect, corporate subsidiary that provides some services where the case was filed.

The granted case is DaimlerChrysler AG v. Bauman (docket 11-965).   DaimlerChrysler is a German company, and it was sued in federal court in California for alleged human rights violations in Argentina for actions by a subsidiary in that country.  The basis for suing the company in the U.S. was that it has another subsidiary that sells the company’s autos in California.  (Daimler was merged with the U.S. company, Chrysler Corp., in 1998.)

The Court had been holding the DaimlerChrysler case until it decided the core question of whether ATS claims could be made when all of those involved were foreign nationals or entities, and the incidents occurred abroad — that is, when there is virtually no U.S. connection.  In the decision last Wednesday in Kiobel v. Royal Dutch Petroleum (10-1491), the Court declared that a lawsuit with all of those aspects could not be heard and decided in a U.S. court.   That decision apparently left an opening, though perhaps quite small, for an ATS claim if there were a connection to the U.S.

One reason why the Justices accepted the DaimlerChrysler case could have been to say something further on what kind of a U.S. connection is sufficient to support an ATS claim in a U.S. federal court.  But another reason could be that the Justices saw in this case a wider issue, on the reach of a court in one jurisdiction to allow litigation against a corporation that is mostly located elsewhere, but has some activity where it was sued.  The Court in recent years has been attempting to sort out, for example, how far a state court can allow its courts to reach an out-of-state company.   The decision that emerges in the DaimlerChrysler case thus could affect not only a federal court’s reach beyond the U.S., but also the power of state courts to reach beyond their borders.

The fact that the Court granted the case so quickly after deciding the Kiobel case has suggested to some attorneys that the Court was inclined to grant the DaimlerChrysler case almost from the moment that it was filed last February, but then thought the better approach would be to wait to see how the ATS litigation came out.  An amicus brief filed in the DaimlerChrysler case by major business organizations told the Court of the wider impact of expanding court jurisdiction in general to corporations beyond a specific locale.

The lawsuit against the German automaker was filed by former employees at the Gonzalez Catan auto plant (or by workers’ relatives) for alleged human rights violations aimed at those workers.  The plant was operated by Mercedes-Benz Argentina.  The lawsuit contended that the Daimler subsidiary identified workers at the plant as “subversives” during the so-called “dirty war” waged by the Argentine military between 1976 and 1983.

State security forces stationed in the plant, the lawsuit contended, arrested and detained workers, and some of them disappeared.  The police chief allegedly behind the raids of the plant was hired by the Daimler subsidiary as its security chief, according to the legal claims.  Those claims were filed in federal district court in California under the ATS and under the Torture Victim Protection Act (TVPA).  (A ruling last year by the Supreme Court barred lawsuits against foreign corporations under the TVPA, but the issue is still open whether corporations may be targeted under ATS.  The corporate liability is, however, is not directly raised in the DaimlerChrysler case.)

The parent company sought to have the case dismissed, arguing that the federal court had no jurisdiction over it.  The district judge said it was a “close question,” but dismissed the case.  The Ninth Circuit Court overturned that result, finding that the company’s continuous corporate activity within the state was substantial enough to justify general jurisdiction over it.

That is the finding DaimlerChrysler challenged in its petition to the Supreme Court.   The case will be heard and decided in the Court’s next Term, starting in October.  This was the only new case granted on Monday.

In another sequel to the Kiobel decision, the Court vacated and returned to the Ninth Circuit a ruling finding U.S. court jurisdiction over British and Australian companies — part of a global copper mining company — for alleged human rights violations in Papua New Guinea during a ten-year civil war.  The case is Rio Tinto PLC v. Sarei (11-649).  Justice Elena Kagan took no part in the order in that case.

Among significant new cases that the Justices refused to review was a challenge by the tobacco industry to a three-year-old federal law that imposed sharp restrictions on how cigarettes and smokeless tobacco are marketed.  Many of the restrictions were upheld by the Sixth Circuit Court, in response to a pre-enforcement challenge to the restrictions as written in the law.   The Justice Department opposed review of the case (American Snuff Co. v. United States, 12-521).

The Court refused to get drawn back into the long-running controversy over Congress’s denial of cost-of-living pay raises for federal judges, for four years in the 1990s.  The judges won the latest round in that dispute, in the Federal Circuit Court, and the federal government sought to take the issue back to the Supreme Court on whether Congress had constitutionally broken a promise to judges that they would get the pay raises.  The new petition was United States v. Beer (12-801).  Although the case as it presently stands involved only the pay rates of six present or former federal judges, the Justice Department told the Court in its filings that the ruling will have a wider impact, and that other judges are filing lawsuits to share in the retroactive cost-of-living adjustments.

The Justices also declined to hear a claim that it is unconstitutional to sentence a sixteen-year-old youth, convicted of a non-homicide crime, to consecutive prison sentences that added up to eighty-nine years behind bars.  The case involved a youth in Youngstown, Ohio, convicted in a kidnap and rape case.   The judge who sentenced Chaz Bunch to sentences totaling eighty-nine years said that it was necessary to assure that Bunch never got out of prison, on the theory that he could not be rehabilitated.  The case was Bunch v. Bobby (12-558).

The Court took no action on Monday on the case testing whether it was unconstitutional for a public high school to hold its graduation ceremonies in a church.  The case is Elmbrook School District v. Doe (12-755).  The case has been listed for consideration four times by the Court, without action so far.  The Court is scheduled to consider it again at Friday’s private Conference.



Recommended Citation: Lyle Denniston, New case on foreign corporations (FINAL UPDATE), SCOTUSblog (Apr. 22, 2013, 9:38 AM),