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Bauman v. DaimlerChrysler Corp.

August 28, 2009; vacated May 6, 2010

BARBARA BAUMAN; GREGORY GRIECO; JOSEFINA NUNEZ; GABRIELE NUNEZ; MIRIAM NUNEZ; SILVIA NUNEZ; EMILIO GUILLERMO PESCE; MIRTA HAYDEE ARENAS; GRACIELA GIGENA; GUILLERMO ALBERTO GIGENA; NURIA GIGENA; AMELIA SCHIAFFO; ELBA LEICHNER; ANUNCIACION SPALTRO DE BELMONTE; HECTOR RATTO; EDUARDO OLASIREGUI; RICARDO MARTIN HOFFMAN; EDUARDO ESTIVILLE; ALFREDO MANUEL MARTIN; JUAN JOSE MARTIN; JOSE BARREIRO; ALEJANDRO DAER, PLAINTIFFS-APPELLANTS,
v.
DAIMLERCHRYSLER CORPORATION; DAIMLERCHRYSLER AG, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of California Ronald M. Whyte, District Judge, Presiding D.C. No. CV-04-00194-RMW.

The opinion of the court was delivered by: D.W. Nelson, Senior Circuit Judge

FOR PUBLICATION

Argued and Submitted October 21, 2008 -- San Francisco, California

Before: Mary M. Schroeder, Dorothy W. Nelson, and Stephen Reinhardt, Circuit Judges.

Opinion by Judge D.W. Nelson; Dissent by Judge Reinhardt

OPINION

Barbara Bauman and 22 other Argentinian residents filed a lawsuit under the Alien Tort Claims Act against Daimler-Chrysler AG for human rights violations allegedly committed by Mercedes Benz Argentina, its subsidiary, in Argentina during the 1970s military regime. DaimlerChrysler AG filed a successful Rule 12(b)(2) motion, the lawsuit was dismissed for lack of personal jurisdiction, and this appeal ensued. We affirm.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

Appellants are 23 Argentinian citizens and residents*fn1 who allege, inter alia, that they (or their family members) were kidnapped, detained, or tortured by Argentinian state security forces acting at the direction of their former employer, Mercedes Benz Argentina ("MBA"). Appellants allege that during the military regime that governed Argentina from 1976 to 1983, MBA officials maintained close ties with high-ranking members of the military, and utilized these forces to rid its plant of individuals MBA itself viewed as subversive.

In 2004, appellants filed a complaint in the District Court for the Northern District of California against DaimlerChrysler AG ("DCAG"), MBA's parent company, requesting relief. In April 2005, DCAG filed a Motion to Dismiss for Lack of Personal Jurisdiction in California.

DCAG is a German stock company with its principal seat in Stuttgart, Germany. Mercedes Benz USA, LLC ("MBUSA") is a Delaware limited liability company with its principal place of business in New Jersey. MBUSA is a wholly-owned subsidiary of the DaimerChrysler North America Holding Corporation, a holding company, which, in turn, is a subsidiary of DCAG. MBUSA has two offices in California, and it is undisputed that MBUSA is subject to general jurisdiction in the state.

DCAG manufactures Mercedes Benz motor vehicles and related component parts. MBUSA is not involved in the design or production of the vehicles. Rather, MBUSA is responsible for the marketing and distribution of the vehicles in California, in addition to providing service and sales support. DCAG sells its vehicles, manufactured in Germany, to MBUSA in Germany, where title passes.

Between 1952 and 1957, an independent distributor named Max Hoffman was the sole distributor of Mercedes Benz vehicles in the United States. In 1958, Hoffman was replaced by an independent subsidiary of the Studebaker-Packard Corporation. In 1964, that company went out of business, and distribution was subsequently undertaken by the predecessor-in-interest to MBUSA.

According to the Vice-President of DCAG, DCAG could not distribute vehicles in California without revising its business model, employing a considerable number of individuals, making massive investments in new facilities, and incurring significant tax exposure. DCAG also presented evidence that the most profitable Toyota distributor in the United States, Southeast Toyota Distributors, is a wholly independent, non-subsidiary distributor.

The DCAG-MBUSA relationship is governed by a General Distributor Agreement ("the Agreement"). Under the Agreement, both parties agree upon objectives to be reached by MBUSA prior to each Sales Period. Either company may terminate the Agreement for good cause and with notice to the other party. In the event of termination, all amounts owed by either party would be immediately due, and DCAG would be required to repurchase all vehicles and parts.

DCAG has no control over the product's ultimate destination within the United States. Until 2001, MBUSA independently decided against buying DCAG G-Class vehicles in California, and those automobiles were therefore sold to an independent and unrelated company.

Upon request by DCAG, MBUSA must provide all information relevant to the financial condition, management, ownership, business practices, and corporate reputation of authorized resellers, as well as copies of all relevant agreements, its comprehensive advertising and marketing plan, and its balance sheets.

MBUSA must also comply with the standards designated by DCAG as binding, although any change requires one year's notice. Marketing strategy and advertising must be consistent with applicable standards, brand representation, and DCAG directives, standards, and processes.

DCAG may reject proposed appointments of Authorized Resellers, must consent before MBUSA management positions can be combined, and must approve the replacement of key personnel. Furthermore, MBUSA must comply with DCAG instructions to modify or alter any of their agreements with Resellers. Offices, sales, and service facilities must be at approved locations and must comply with DCAG requirements. Finally, DCAG reserves the right to approve or disapprove of the type, design, and size of signage.

On November 22, 2005, the District Court issued an order tentatively granting DCAG's motion. The court found that (1) DCAG did not have continuous and systematic contacts via the contacts of MBUSA under agency jurisdiction; and (2) the exercise of jurisdiction would be unreasonable, considering

(a) the extent of DCAG's purposeful interjection, (b) the burden on DCAG, (c) conflicts with the sovereignty of Argentina and Germany, (d) California's interest in adjudicating the dispute, (e) the availability of alternative fora, (f) efficient judicial resolution, and (g) the need to give convenient and effective relief to the plaintiffs.*fn2

The court's ruling, however, was tentative and it ordered limited jurisdictional discovery on: (1) whether an agency relationship existed between DCAG and MBUSA, and (2) the ability of the appellants to pursue their claims in Germany or Argentina. In its Supplemental Opposition to the Motion, after discovery, appellants addressed the agency relationship and alternative fora as requested. They also argued that jurisdiction should be conferred upon DCAG because of its contacts with the United States as a whole, pursuant to Fed. R. Civ. P. 4(k)(2), and requested, in the alternative, that the District Court transfer the case to Michigan if it found that it did not have personal jurisdiction over DCAG.

On February 12, 2007, the court concluded that its earlier ruling was correct and granted the motion to dismiss. In its final order, it found that (1) MBUSA was not DCAG's agent for the purpose of conferring general jurisdiction, and (2) both Germany and Argentina provided an adequate forum for appellants' claims. The court did not consider the 4(k)(2) and change of venue arguments because both exceeded the scope of its supplemental briefing order. The appellants timely appealed, asserting that the District Court erred in finding that it lacked jurisdiction over DCAG, and alleging various procedural defects in the lower court's ruling.

JURISDICTION

The parties dispute whether there is subject matter jurisdiction over appellants' claim pursuant to the Alien Tort Claims Act and the Torture Victims Protection Act. 28 U.S.C. § 1350. The District Court held that it would resolve the question of personal jurisdiction first. This exercise of discretion was proper. See Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 431 (2007) ("There is no mandatory sequencing of jurisdictional issues.... [A] federal court has leeway to choose among threshold grounds for denying audience to a case on the merits.") (internal quotations omitted); see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 588 (1999).

STANDARD OF REVIEW

This court reviews a dismissal for lack of personal jurisdiction de novo. Butcher's Union, Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 538 (9th Cir. 1986). The district court's decision to dismiss or transfer a case pursuant to 28 U.S.C. § 1406(a) is reviewed for abuse of discretion. See King v. Russell, 963 F.2d 1301, 1304 (9th Cir. 1992).

"It is the plaintiff 's burden to establish the court's personal jurisdiction over a defendant." Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). When, as here, the district court " 'rel[ies] on affidavits and discovery materials without holding an evidentiary hearing, dismissal is appropriate only if the plaintiff has not made a prima facie showing of personal jurisdiction.' " See Am. Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) (quoting Fields v. Sedgwick Assoc. Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986)). "[C]onflicts between the facts contained in the parties' affidavits must be resolved in... [plaintiff 's] favor.' " Id. (internal quotations omitted).

DISCUSSION

"Personal jurisdiction over a nonresident defendant is tested by a two-part analysis." Chan v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1404 (9th Cir. 1994). "First, the exercise of jurisdiction must satisfy the requirements of the applicable state long-arm statute." Id. "Second, the exercise of jurisdiction must comport with federal due process." Id. at 1404-05. "[B]ecause California's long arm statute is coextensive with the limits of due process, the court need only consider the requirements of due process." Synopsys, Inc. v. Ricoh Co., 343 F. Supp. 2d 883, 886 (N.D. Cal. 2003).

Due process requires that a nonresident defendant have certain minimum contacts with the forum state so that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945). Where the claim does not arise out of a defendant's contacts with the forum, there is no specific jurisdiction. However, "[i]f the defendant's activities in the forum are substantial, continuous and systematic, general jurisdiction is available." Unocal, 248 F.3d at 923. "In addition to establishing the requisite contacts, the assertion of jurisdiction must be found reasonable." In re Phenylpropanolamine Prods. Liab. Litig., 344 F. Supp. 2d 686, 690 (W.D. Wash. 2003).

A. AGENCY JURISDICTION

Appellants argue that the continuous and systematic contacts of MBUSA, a subsidiary, should be attributed to DCAG, its parent, because MBUSA was its agent for purposes of personal jurisdiction.

"The existence of a relationship between a parent company and its subsidiaries[, however,] is not sufficient to establish personal jurisdiction over the parent on the basis of the subsidiaries' minimum contacts with the forum." Unocal, 248 F.3d at 925. "[A] parent corporation may be directly involved in the activities of its subsidiaries without incurring liability so long as that involvement is consistent with the parent's investor status." Id. at 926 (internal quotations omitted).

1. AGENCY DOCTRINE

[1] In Unocal, we described our agency doctrine, by which the contacts of a subsidiary may be imputed to the parent. 248 F.3d at 928-31. "To satisfy the agency test, the plaintiff must make a prima facie showing that the subsidiary represents the parent corporation by performing services 'sufficiently important to the [parent] corporation that if it did not have a representative to perform them, the [parent]... would undertake to perform substantially similar services.' " Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1135 (9th Cir. 2003) (quoting Chan, 39 F.3d at 1405). The "test permits the imputation of contacts where the subsidiary was 'either established for, or is engaged in, activities that, but for the existence of the subsidiary, the parent would have to undertake itself.' " Id. (internal quotations omitted).

[2] The Unocal "court distinguished an agency relationship between a parent and its subsidiary from that of a holding company and its subsidiary, explaining that in the case of a holding company the parent could simply hold another type of subsidiary." 248 F.3d at 929 (citing Gallagher v. Mazda Motor of Am., Inc., 781 F. Supp. 1079, 1085 (E.D. Pa. 1992)) (emphasis added). If "the business of the parent is the business of investment," then the subsidiaries do not conduct business as agents. Id. (internal citations omitted). "Where, on the other hand, the subsidiaries are created by the parent, for tax or corporate finance purposes, there is no basis for distinguishing between the business of the parent and the business of the subsidiaries.' " Id. "The doctrine supports the ...


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