Monday, August 31, 2009
Court Rejects Suit Over Argentine Rights Violations
By KENNETH OFGANG, Staff Writer
The maker of Mercedes-Benz automobiles cannot be sued in California for human rights violations that its Argentinean subsidiary may have participated in when the country was ruled by a military junta in the 1970s and 1980s, the Ninth U.S. Circuit Court of Appeals ruled Friday.
The court affirmed the dismissal, for lack of personal jurisdiction, of a suit by 23 citizens and residents of Argentina who claim they, or members of their families, were kidnapped, detained, or tortured by security forces directed by Mercedes-Benz Argentina. They claim that Mercedes Benz Argentina had a close relationship with the regime, which worked with the company in targeting those believed to be working with leftist trade unions during the “Dirty War.”
The suit was filed under the Alien Tort Claims Act, which allows an action in federal court “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” Named as defendant was DaimlerChrysler AG, the German-based parent of Mercedes Benz Argentina.
In dismissing, U.S. District Judge Ronald Whyte of the Northern District of California rejected the plaintiffs’ claim that jurisdiction exists in this state based on an agency relationship between the German company and Mercedes-Benz USA, which has offices and does business in California.
The appellate panel, in a 2-1 decision, agreed with the district judge. Senior Judge Dorothy W. Nelson, joined by Judge Mary Schroeder, wrote for the court, while Judge Stephen Reinhardt dissented.
Nelson explained that while a subsidiary may be considered the agent of its parent for jurisdictional purposes, this will not always be so. The issue, the judge said, is whether the parent exerts “pervasive and continual” control over the subsidiary, and, if so, whether the subsidiary performs a domestic function that the parent would otherwise perform itself.
The plaintiffs, she concluded, failed to establish that DaimlerChrysler AG exerts the required level of control over Mercedes-Benz USA, which she said was largely autonomous in distributing vehicles in this country. It is the subsidiary, she noted, that decides where it will distribute cars.
“Even if DCAG did exert pervasive control,” the judge went on to say, “appellants have also failed to make a prima facie showing that DCAG would undertake to perform substantially similar services in the absence of MBUSA.” She noted that prior to the creation of Mercedez-Benz USA, Daimler sold cars in California and other states, first through an independent distributor and then through the now-defunct Studebaker Packard Corporation.
Reinhardt, dissenting, argued that the majority was employing the wrong test. The issue was not control, he declared, “but rather the relative importance of the services provided to the parent corporation.”
“In an increasingly complex and globalized economy, corporations such as DCAG reap enormous profits from the sale of their goods in the United States, achieved through the use of distributors, frequently in the form of subsidiaries. Many multinational companies organize their corporate structure and acquire subsidiaries for the sole purpose of obtaining a maximal benefit from the American market. DCAG, for instance, has earned 45 [percent] of its annual revenue from its sales in the United States. 2.4 [percent] of its total sales in 2004 were in California. Given these realities, and the continually evolving ways of doing business in an international arena, it is a mistake for the majority to formalize and rigidify our test for personal jurisdiction with an over-emphasis on control.”
Among the factors that should have been considered, he argued, are the parent corporation’s control over advertising and marketing, its 100 percent stock ownership of the subsidiary, its ownership of the “Mercedes-Benz” trademark, and its retention of veto power over the subsidiary’s selection of dealers, its key personnel decisions, and any alterations to the cars.
The case is Bauman v. DaimlerChrysler Corporation, 07-15386.
Copyright 2009, Metropolitan News Company