Daimler Wins as U.S. High Court Rejects Human-Rights Suit

The U.S. Supreme Court gave multinational companies a stronger shield against lawsuits, throwing out a case against Daimler AG (DAI) over a company unit’s alleged collaboration in torture and killings in Argentina.

The justices today said the parent company didn’t have enough ties to California to give courts there the authority to hear the case. The ruling, which was unanimous in its outcome, adds to a line of Supreme Court decisions that have cut the options available to people trying to sue multinational corporations in American courts.

Daimler’s Argentine Mercedes-Benz unit was accused of collaborating with state security forces during the “Dirty War” from 1976 to 1983. Mercedes-Benz Argentina allegedly identified workers seen as union agitators, knowing security forces would then kidnap, torture and in some cases kill the people. The company denies the allegations.

“The plaintiffs’ accusations are groundless, and today’s opinion concludes the prolonged litigation in the United States,” Daimler which is based in Stuttgart, Germany, said in an e-mailed statement.

The ruling puts new limits on what lawyers call “general jurisdiction” -- the power of courts to hear suits against a defendant no matter where the alleged wrongdoing took place.

Photographer: Guenter Schiffmann/Bloomberg

Daimler AG, based in Stuttgart, Germany, contended the courts in California lack “personal jurisdiction” over the company. Close

Daimler AG, based in Stuttgart, Germany, contended the courts in California lack... Read More

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Photographer: Guenter Schiffmann/Bloomberg

Daimler AG, based in Stuttgart, Germany, contended the courts in California lack “personal jurisdiction” over the company.

The decision in most cases restricts that power to states where a company is incorporated or has its principal place of business, said Andrew Pincus, a Washington lawyer who has argued for limits on suits against multinational corporations. Other than in those two places, “there’s almost never going to be general jurisdiction over anybody,” said Pincus, a lawyer at Mayer Brown.

Former Employees

Daimler was sued by a group of former employees and representatives of deceased workers. They argued that the company had sufficient contacts with California because of billions of dollars in sales through its Mercedes-Benz USA unit. A lawyer for the group didn’t respond to e-mails requesting comment.

In her opinion for the court, Justice Ruth Bader Ginsburg said Daimler’s “slim contacts with the state hardly render it at home there.”

Ginsburg said the plaintiffs’ reasoning would subject Daimler to court cases anywhere Mercedes-Benz had significant sales. “A corporation that operates in many places can scarcely be deemed at home in all of them,” she wrote.

‘Too Big’

Justice Sonia Sotomayor agreed with the result while saying Ginsburg went too far in shielding multinational corporations.

“In recent years, Americans have grown accustomed to the concept of multinational corporations that are supposedly ‘too big to fail,’” Sotomayor wrote. “Today, the court deems Daimler ‘too big for general jurisdiction.’”

The ruling was a limited one, said Robert Peck, president of the Washington-based Center for Constitutional Litigation, which represents plaintiffs in suits against corporations. He said Ginsburg didn’t preclude plaintiffs from pressing a different theory, one that claims a subsidiary was acting as the parent company’s legal agent.

“It is fair to say that Justice Ginsburg has written a narrow opinion,” Peck said in an e-mail.

Pincus disagreed with that assessment, saying the remainder of Ginsburg’s opinion precludes most suits even when a U.S. subsidiary acts as the parent’s agent.

‘Almost Never’

Ginsburg’s message, Pincus said, was, “I’m telling you, agency or not, you’re never going to meet this test -- or almost never.”

Last year, the Supreme Court scaled back a favorite legal tool of human-rights activists, the 1789 Alien Tort Statute. The majority said the Alien Tort Statute generally doesn’t apply to conduct beyond U.S. borders.

The people suing Daimler were invoking the Alien Tort Statute along with state and Argentine law in their suit.

In 2011, the court said three overseas units of Goodyear Tire & Rubber Co. couldn’t be sued in a North Carolina court over a bus wreck in France.

The case is DaimlerChrysler v. Bauman, 11-965.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

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