The Supreme Court heard oral arguments yesterday in a case relating to corporate collaboration in human rights abuses in a foreign country. DaimlerChrysler v. Bauman addresses a situation that is becoming increasingly common in a world with multinational corporations doing business around the world through a variety of subsidiaries. Legally, all those corporations are different entities. To what extent can a parent company use the fact of separate identity to shield itself from liability for actions taken by one of its subsidiaries?
The case involves a lawsuit against DaimlerChrysler, a corporate giant headquartered in Germany but which has wholly-owned subsidiaries doing business in the U.S. and around the world. One of those subsidiaries in Argentina allegedly collaborated with the military dictatorship that ran the country from 1976-1983, turning in employees as "subversives" who were subsequently arrested or simply disappeared. Some of the victims or their surviving relatives are now suing the parent company in a California court under the Alien Tort Statute, which allows victims of human rights violations in other countries to sue in American courts, at least under some circumstances.
Under the Constitution, DaimlerChrysler can't be made subject to courts in California unless the company has at least some minimum level of contacts with the state. The victims say it does, since DaimlerChrysler has a wholly-owned subsidiary that regularly does business in California: Mercedes-Benz USA. The Ninth Circuit agreed, but during oral arguments, it appeared clear that DaimlerChrysler will likely win the case. As reported in SCOTUSBlog:
The Court has made it quite clear in recent years that it is highly skeptical of courts, either at the state or federal level, reaching out to hold a business firm to account based on the firm's debatable ties to that court's area of authority. That instinct was clearly on display again in the Daimler case.
[It] was obvious that most of the members of the Court — and perhaps all — had reacted negatively to the sweep of the Ninth Circuit's ruling. Whatever rule of law they might choose to overturn the Ninth Circuit, it appeared that they would find one that basically would say this reach was just far too ambitious.
That may be the key – even if the Justices rule for DaimlerChrysler, what rule will they set up for the future? One that leaves the door open to victims of human rights abuses in other cases, or one that makes it even easier to use the corporate form to escape liability? As we saw in last year's Kiobel case, even when the Justices agree on the basic result, the right-wing Justices can write a broad opinion closing the door to future cases, even where the more moderate Justices would leave a door open.