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WASHINGTON (Reuters) - The U.S. Supreme Court ruled on Tuesday that Daimler AG cannot be sued in California over alleged abuses in Argentina, a decision likely to erode further the reputation of the United States as a global venue for human rights claims.
The 9-0 decision was the second by the high court in less than a year to make it harder for plaintiffs to sue foreign-based multinational corporations in U.S. courts for alleged human rights violations. Lower courts already have thrown out similar lawsuits based on a 2013 Supreme Court decision.
In Tuesday's ruling, the justices said companies must do substantial business in the United States to be sued there. The fact that the German-based automaker owns a U.S.-based subsidiary that does business in California was not enough for the lawsuit to proceed, the court said.
Daimler faced allegations that a subsidiary violated the human rights of workers at a plant in Argentina in the 1970s.
The court ruled on a unanimous vote that the lawsuit could not go ahead. The justices said Daimler's connections with California, where the lawsuit was filed, were not sufficient for it to face a lawsuit there.
The court reversed a May 2011 San Francisco-based 9th U.S. Circuit Court of Appeals ruling in favor of human rights plaintiffs.
Marco Simons, an attorney with Earthrights International, who represents plaintiffs in human rights cases, criticized the court's reasoning. Simons said the court endorsed the idea that "it's better for the economy of the U.S. and the world to limit the ability to sue multinational corporations."
A Daimler spokeswoman said, "We have always regarded the accusations as groundless."
Workers or relatives of workers at an Argentina-based plant operated by Mercedes-Benz, a wholly owned subsidiary of Daimler, said the company punished plant workers viewed by managers as union agitators. They also said the company cooperated with Argentina's military and police forces.
Daimler is headquartered in Stuttgart, while its Mercedes-Benz USA LLC subsidiary is incorporated in Delaware and does most of its business in New Jersey.
The high court's ruling does not prevent companies from being sued for conduct that occurs in the United States.
A 2013 ruling also pared back the circumstances for suing multinational companies in U.S. courts over human rights allegations. The justices held that a federal court in New York could not hear claims made by 12 Nigerians who accused Anglo-Dutch oil company Royal Dutch Shell Plc of complicity in a crackdown on protesters in Nigeria from 1992 to 1995.
That ruling already brought an end to some lawsuits against foreign companies, limiting the impact of Tuesday's decision.
In one case decided in August, the New York-based 2nd U.S. Circuit Court of Appeals held that lawsuits against Daimler, Ford Motor Company and International Business Machines Corp could not proceed. The companies were accused of facilitating decades of race-based crimes such as torture and extrajudicial killings in South Africa because their South African subsidiaries sold products to the government there.
The legal question in the Daimler case, which focused on when courts have jurisdiction over certain claims, is different from that in the Shell case, which focused on an obscure federal law called the Alien Tort Statute.
Corporate defense lawyers say Tuesday's ruling will further undermine the notion of the United States serving as a global court for human rights claims.
Dominic Perella, a lawyer at the Washington-based Hogan Lovells firm, said the court "is not closing the door on these lawsuits, but making it much harder to bring them."
Human rights lawyers previously were eager to sue in U.S. courts because of what defense lawyers describe as pro-plaintiff litigation rules that made it easier for plaintiffs to negotiate favorable settlements.
Justice Ruth Bader Ginsburg wrote in Tuesday's majority opinion that neither Daimler nor Mercedes-Benz USA, also known as MBUSA, is incorporated in California.
"If Daimler's California activities sufficed to allow adjudication of this Argentina-routed case in California, the same global reach would presumably be available in every other state in which MBUSA's sales are sizable," she wrote.
The claims had "nothing to do with anything that occurred or had its principal impact in California," Ginsburg added.
The justices did not want to allow U.S. courts broad authority to hear such cases in part because of concerns raised by other countries. In the European Union, companies are generally only sued where they are based, Ginsburg noted.
Justice Sonia Sotomayor wrote a separate opinion concurring in the judgment but differed with her colleagues over the legal rationale. She said she would have ruled that, regardless of Daimler's links with California, the lawsuit should not go ahead because "the case involves foreign plaintiffs suing a foreign defendant based on foreign conduct."
A lawyer for the plaintiffs could not be reached for comment.
The case is Daimler AG v. Bauman, U.S. Supreme Court, No. 11-965.
Reporting by Lawrence Hurley. Additional reporting by Kerstin Doerr in Berlin; Editing by Will Dunham, Peter Henderson and Dan Grebler