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US Supreme Court Significantly Limits Where Foreign Companies May Be Sued in US Courts for Claims Unrelated to Their Activities in a State

The United States Supreme Court earlier this month issued a major ruling that will significantly limit where corporations may be sued for claims that do not relate to business they may do in a particular place in the US. In Daimler A.G. v. Bauman, the Court ruled unanimously that DaimlerChrysler AG in Germany could not be sued in the California federal court based on the continuous and substantial California business activities of its US subsidiary Mercedes-Benz USA, LLC, where the claims at issue were for human rights violations allegedly committed by Daimler's Argentine subsidiary in Argentina decades ago. By significantly limiting when a company may be sued in a forum in which its contacts do not relate to the claims asserted, Daimler will have a broad ripple-effect on US litigation, where personal jurisdiction is an essential element of every lawsuit. This decision will have far-reaching effects, including, for example, where mass tort and products liability claims may be asserted, when US courts should order discovery of information located abroad from a non-US party or non-parties located outside the United States, or when US courts may attempt to enforce injunctions or judgments beyond the United States against non-US parties or non-parties. At its most basic, Daimler suggests that the mere fact that a company is licensed to do business or operates a branch in the US will no longer provide a basis for it to be sued there on claims that have nothing to do with the company's actual activities in that state. The decision bears close study by companies because it could significantly affect how certain litigation risks are managed within a corporate structure.

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